2019 has brought good tidings to India’s poor. With parliamentary elections in mind, the BJP and Congress have been competing to be seen as messiahs of the poor.
The Congress has promised that if it comes to power, it will waive loans of farmers across India. Not to be left behind, the BJP, in the Union budget, announced a new scheme for farmers called PM Kisan Samman Nidhi Yojana. Under this scheme, 12.5 crore small and marginal farmer households will receive Rs 6,000 per year, in three instalments of Rs 2,000 each. In an unusual move, the scheme was implemented immediately. An amount of Rs 20,000 crore was provided in the 2018-19 budget, while Rs 75,000 crore was allocated in the interim budget for 2019-20.
With the promise of the Nyuntam Aay Yojana (NYAY), the Congress’s minimum income guarantee (MIG) has taken a leap from economic survey to election campaign. Even if the Congress does not form the government, it is quite likely that we will hear a lot more about it in subsequent assembly elections. Like the Rythu Bandhu scheme initiated by Telangana, states will show the way for an income guarantee.
Also Read: Will Congress’s NYAY Really Mean Justice for the Poor?
After the Economic Survey of 2016-17 devoted a chapter to universal basic income, it was only a matter of time before the idea was picked up by political parties. Thus, the promise of giving Rs 6,000 per month to 5 crore households by way of income guarantee has not come a day too soon.
Fears of fiscal imbalance
While the financial world is rightly worried about the fiscal imbalance it will cause to the Union budget, the finance departments of Central and state governments will be challenged into identifying the 5 crore most deserving households. Those working in these departments know that political masters have their way in such matters, as loan waivers have shown.
It is acknowledged that even without the help of the Centre, the state governments of Andhra Pradesh, Assam, Chhatisgarh, Karnataka, MP, Maharashtra, Punjab, Telangana, TN, Rajasthan and UP have already waived Rs 2.17 lakh crore of agricultural loans since April 2014.
A scheme of NYAY’s magnitude will surely require the burden to be shared by the Centre and the states. PM Kisan is an outlier in this respect, as it is fully funded by the Centre. Since it was announced just before the parliamentary elections, the Centre took the plunge. In the process, it ignored its own decision in 2016 to increase the states’ share in all Centrally sponsored schemes to 40% (except in the Northeast and hilly states). In fact, states bear 50% of premium subsidy under the PM Fasal Bima Yojana.
So, it will not be unrealistic to assume that the Centre and the states can raise Rs 3.60 lakh crore a year to fund the NYAY. In any case, it is unlikely that all 5 crore households will be identified in the first year. It will take at least two years for all states to complete the process of identification and linking bank accounts to Aadhaar.
If states are asked to share 40% of the scheme’s expenditure, the Centre’s share will cost Rs 2.16 lakh crore.
Congress president Rahul Gandhi addresses a press conference at AICC headquarters on March 25, 2019. Credit: PTI/Kamal Singh
Identifying the beneficiaries
The primary source of data for beneficiaries of NYAY could be the Antodaya Anna Yojana (AAY) under the public distribution system, which covers 2.36 crore families and 9.40 crore persons. The AAY households are eligible to receive 35 kg of wheat/rice per month. These households were identified on the basis of following criteria:
- Households headed by widows or terminally ill persons/disabled persons/persons aged over 60 years with no assured means of subsistence or societal support.
- Widows or terminally ill persons or disabled persons or persons aged 60 years or more or single women or single men with no family or societal support or assured means of subsistence.
- All primitive tribal households.
- Landless agriculture labourers, marginal farmers, rural artisans/craftsmen such as potters, tanners, weavers, blacksmiths, carpenters, slum dwellers, and persons earning their livelihood on daily basis in the informal sector like porters, coolies, rickshaw pullers, hand cart pullers, fruit and flower sellers, snake charmers, rag pickers, cobblers, destitute and other similar categories in both rural and urban areas.
- All eligible below poverty line (BPL) families of HIV positive persons.
Assuming that all these 2.36 crore families are found eligible under the NYAY also, the total expenditure at the rate of Rs 72,000 per annum will be Rs 1.70 lakh crore. If the Centre has to bear 60% of this, it has to find Rs 1.01 lakh crore in the first year of implementation.
To identify the remaining 2.64 crore families, the Socio-Economic Caste Census (SECC) 2011 will come of use. For the Pradhan Mantri Awas Yojana, the SECC was used to identify 72.65 lakh beneficiaries, who are eligible to get Rs 1.2 lakh as grant in plain areas and Rs 1.3 lakh in NE and hilly states. In 2018-19, the revised estimate for the PMAY was Rs 19,900 crore. If the SECC has been found useful by the Modi government for such large expenditure, it can be used to identify the remaining 2.64 crore families for the NYAY also.
Unending expenditure
The real challenge posed by such welfare expenditure is its unending nature. The National Food Security Act enacted in 2013 provided for revision of issue price of food grains every three years. However, even a ‘strong’ government could not raise the price from Rs 2 per kg for wheat and Rs 3 per kg for rice. The N.T. Rama Rao government introduced rice at Rs 2 per kg in 1982. At present, the AP government bears Rs 2 per kg of additional subsidy and charges Rs 1 per kg for rice. Tamil Nadu gives it free.
Also Read: The Time for a Minimum Income Guarantee in India Has Come
If the Centre can convince the states to share 40% of the expenditure, it is surely possible to implement the NYAY without causing much fiscal distortion. But in order to ensure that welfare schemes like PDS, PMAY, PM Ujjwala Yojana and Ayushmaan Bharat do not continue for all existing beneficiaries in perpetuity, there is an urgent need to fix an end date for such schemes. Their continuation should only come after an independent and credible evaluation by experts. It is unlikely that politicians will accept any such advice, so the Supreme Court’s intervention may be required to bind political parties to a prudent fiscal discipline.
Siraj Hussain retired as Union agriculture secretary. Presently, he is a visiting senior fellow at ICRIER.