Economy

'Rahul Gandhi's Minimum Income Plan May Cost Rs 3.5 Lakh Crore'

In an interview, Congress's Praveen Chakravarty says that a flat Rs 6,000 payment won't upset the Centre's fiscal math.

On Monday, Rahul Gandhi, unveiled the Congress Party’s minimum income plan which entails providing Rs 72,000 per annum to the poorest 20% of households if voted to power. Praveen Chakravarty, who heads the Congress’ data analytics department, spoke to Nitin Sethi and Ishan Bakshi explaining the details of the scheme. Edited excerpts

Take us through the fiscal as well as the implementation details of what Congress has proposed today as NYAY or the Minium Income Guarantee Scheme?

The genesis of the idea – a basic minimum income – has been around for a long time. We have been working on this for the past few months involving experts from across the world.

There are two aspects to it. One is as the Congress president said, this is the last attack on poverty. Fundamentally, the assumptions of trickle-down economics are now starting to kind of come under question. Perhaps the benefits of trickle down have been vastly exaggerated. So there is very clearly a need for a new social contract that redefines relations between the State and the citizens. It is about the State ensuring that there is a certain minimum safety net.

Second, I think in the Indian context it plays an additional impact. I call it the re-monetisation of the Indian economy. This basically puts money in the hands of people. It will have an economic impact through consumption and through other channels. In the Indian context when we all acknowledge that the economic engine has stopped.

The possible fiscal impact of the scheme…

Right now there is a certain minimum income every family in India earns today. We looked at all the income and other data sets out there. It turns out that almost everyone earns at least Rs 5,000-6,000 a month as a family. If you have nothing else, you have MNREGA.

So you are monetising the value of state support to the family when you think of this Rs 5,000-6000 as the basic income earned by the family?

Yes, absolutely. So when we think of Rs 12,000 a month as the basic, reasonable income a family should have, the need for supporting them comes to Rs 6,000 a month – that is how that figure was arrived at. Rs 12,000 a month is the threshold line we draw and no family should be left behind or fall below this line. And from that this gap of Rs 6,000 per month per family is drawn.

So the fiscal implication of this…

It is likely to cost Rs 3.5 trillion.

So you are saying every beneficiary will get a flat Rs 72,000 and we are not talking of an income gap being filled by this scheme?

Yes. Every beneficiary gets Rs 6,000 a month.

So we are not doing an income/poverty gap analysis?

We can’t. I keep saying we shall have to think of it at the cluster level. Everyone gets the same amount. Accounting for various factors we have decided to draw the line at Rs 12,000 rupees per month. But don’t get stuck at it because it is an imputed number.

The standard fixed amount to be given is Rs 6,000 per month per to 20% of the country’s households that we believe are below this threshold.

Explain how does the Congress plan to implement it?

The first thing we shall do is form a committee. We will involve states. Any economic policy in India today, after GST especially, will have to involve the states. There will be a pilot. We will roll it out in phases. This is the plan. It immediately tells you that the budget document for FY20 will not reflect the number. There will be a revenue boost and there will be expenditure rationalisation. It has to be a combination of both.

When you mean rationalisation what schemes and expenditures are we talking about?

I cannot give you any detail because this is a manifesto stage. See, today the states and Centre together spend about Rs 60 lakh crore. At the peak we are talking about NYAY requiring Rs 3.5 lakh crore. We have looked at it from a fiscal capacity point of view and that’s why we are convinced that it is possible within prudent fiscal limits. In fact, the President of the Congress has also said we shall stick to fiscal discipline. See, if you are going to ask me at this point of time which scheme is going to get cut and which is not, this is not the time. Our maths suggests, at no point of time, will the expenditure be more than 1.2% of the GDP at its peak.

At the implementation level, someone suggested the beneficiaries would be identified using the income certificates given at the SDM levels?

I think it is possible today to identify the 5 crore households in India that earn below Rs 12,000 a month. It can be at the pin code level; it can be at other levels. There have been enough advances in data science today that it is possible. My simple suggestion to you is that you do not need every household detail. It could be block level. It could be at various levels. It is today possible to impute households in regions that earn less than the benchmark. We can verify it through surveys. I think let’s not get caught up in how difficult it is to implement simply because ten years ago it was very difficult. It is not. This is why the idea is being talked about now.

The reason we believe the time has come for the idea is because of our fiscal capacity can bear it and with advances in data sets – it can be Aadhaar – we can target beneficiaries today. It is possible.

By arrangement with Business Standard.