Author : Satish Misra

Expert Speak India Matters
Published on Mar 29, 2019

The Indian National Congress's promise of guaranteed minimum income (NYAY) has shifted the narrative surrounding the general elections back to economic issues.

Congress promise of monthly income to poor: A game changer or a recipe for economic disaster?

A debate is currently raging in the country on the Indian National Congress (INC) promise of guaranteed minimum income (NYAY- Nyuntam Aay Yojna) to 20 per cent of the poorest families. Congress president Rahul Gandhi said if his party is voted to power in the ongoing parliamentary election then poorest of the families would be given an income support of Rs 6,000 per month or Rs 72, 000 per annum, benefitting 25 crore households.

Those belonging to left of the center ideological spectrum welcomed it calling it a game changer while others adherents of right of the center politics dubbed it as “bluff” and a recipe for economic disaster.

Debate is old and as idea of universal basic income or with different nomenclatures is at lease couple of centuries old. In the 16th century, Sir Thomas More raised the idea in Utopia saying that every person should receive a guaranteed income. In the late 18th century, English Radical Thomas Spence and American activist Thomas Paine strongly back the idea for a welfare system that guarantees all citizens a certain income.

Debate on the issue has been going on across the globe. It surfaces when a political party promises or a government announces a populist scheme that is meant for the weaker sections of society. In India, debate has been going on since the country became independent. Question was what kind of economic system- capitalist or socialist-, India should follow. After long debates and discussion, decision went in favour of the mixed economy.

Every government since independence made efforts to address the problem of wide spread poverty and several subsidy schemes were introduced by successive governments that claimed to reduce percentage of poor in society.

During the freedom struggle, leaders and parties had promised the idea of creating a welfare state to the people. Constitution makers conceived India as a welfare state. Article 38 in the Part IV of Constitution that deals with the Directive Principles of State Policy clearly states: “The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions of the national life.”

Though promise has been made as part of the party manifesto that are released by political parties during the national or state elections but its pros and cons need to be viewed in the light of the concept of welfare as defined in the Indian Constitution.

Congress President Subhash Chandra Bose had first mooted the idea of a minimum income guarantee scheme in 1938 at the Haripur session. Even a committee headed by Jawaharlal Nehru was constituted to study the idea and explore its feasibility but it could not be pursued possibly because of the outbreak of the World War II.

Following the constitutional objective, different governments introduced various subsidy schemes but inequalities particularly in economic field continued to persist. Gap between rich and poor became more pronounced particularly after the country’s economy was opened with massive dose of liberalization in the last decade of the last century.

In 2004, the Congress-led UPA government embarked on right based schemes like National Rural Employment Guarantee Act and Right to Education Act. In September 2013, right to affordable and adequate quality food was recognized by the Indian state.

Right based approach and assuring minimum guarantees for food, education, employment and now income is opposed with arguments that such schemes kill human initiative, destroys incentives to work and promotes fiscal indiscipline. It is also argued that such measures often result in corruption. It is also said that implementation on ground of such ideas is very difficult,

A report on 25 years of liberalization and globalization of the Indian economy prepared by Centre for Equity Studies, published in 2017, said the post-1990 growth was up to three times of the levels in the first four decades since Independence but the rate of poverty reduction slowed down from 0.94% per annum during 1981-90 to only 0.65% between 1990 and 2005.

Consequently, the high decibel growth led to 12 fold increase in wealth for the richest 10% since 2000, while for the poorest 10% the income jumped by just three times and the reason was dismal job creation, the India Exclusion report said.

With the unemployment touching the highest levels in the last 45 years, the promise of a minimum income to the poorest families is sure to catch the public imagination in the battle of perception that often decisively affect the outcome of the electoral contest.

It is matter of debate whether an expenditure of Rs 360,000 crores annually that roughly works to 1.2 per cent of the GDP will result in fiscal imbalance or not. Through rationalization of existing subsides by eliminating the unnecessary and retaining the useful ones, resources can be generated to address the issue.

Argument that empty stomachs or lack of nutritional food has an adverse impact on human growth and impedes human intelligence sounds credible and thus insurance against poverty could be a factor in acceleration of economic growth, a section of experts supporters of the concept welfare state argue.

Right- based approach and a guarantee of basic minimum income have given positive results in countries like Brazil where a law was passed in 2001 that mandated such a welfare system. In 2004, Brazil introduced ‘Bolsa Familia’ a social welfare programme that is trying to reduce short-term poverty by direct cash transfers and progressively eliminate long-term poverty by increasing human capital among the poor through conditional cash transfers. Bolsa Familia scheme has been hailed internationally as it has resulted in reducing poverty by 27 per cent.

Whether the idea is a game changer during the ongoing general elections or not could be anybody’s guess but it has brought economic issues back in the national debate that was running on the national security narrative.

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Satish Misra

Satish Misra

Satish Misra was Senior Fellow at ORF. He has been a journalist for many years. He has a PhD in International Affairs from Humboldt University ...

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