Congress said much of the cost of the guaranteed income scheme could come from savings made by cracking down on tax evasion and ensuring existing subsidies on staples such as food and fuel went only to those who qualified.
Minimum Income guarantee: Congress party's Rahul Gandhi on Monday promised 'minimum Income Guarantee' for poor people if the party comes to power in 2019. In a public rally in Chhattisgarh he said, "We have decided that every poor person in India would be guaranteed a minimum income after the Congress forms the government in 2019".
"No one will go hungry in India, no one will remain poor," Gandhi said."We will do this in every state of India."
Labelling it as “the first of its kind scheme in the world”, he said that the needy will get the money directly into their accounts. As far as selling dreams go, this one takes the cake, never mind the consequences.
However, the question remains can India afford the minimum income guarantee?
In such populism scheme, there is usually a massive public expenditure is involved. There is a hint of such a programme in the Economic Survey 2016-17, which had proposed income support for the bottom 75 per cent of the population.
Praveen Chakravarty, who heads the Congress’s data analytics team, says that the minimum income guarantee, announced by president Rahul Gandhi on Monday, is an “idea that has been endorsed by economists all over the world”.
But another question is that how will the government balance its financial equilibrium given that food subsidy is close to Rs 1,70,000 crore while MGNREGA costs an additional Rs 55,000 crore? Additionally, the plan would involve identifying beneficiaries of existing schemes, but would necessarily entail rolling back several subsidies: In other words, a universal basic Income (UBI) for all that has been implemented in some developed countries, but has no successful working model in developing countries.
However, in an exclusive interview to DNA, Chakravarty explained, "The minimum income guarantee is not universal basic income; it is not for everybody, it is targeted for the poor family. The idea is that every Indian family must be at a certain income level; it could be Rs 1 lakh or Rs 1.5 lakh a year, and there’s a means to arrive at that amount. Once we do, then we will find out the families that live below that. This income support is for those people, to bring them up to the minimum level. UBI is different while being broadly similar. Under it, everybody will get a certain amount of money. We felt that was not the right, and ours is a targeted support guarantee. What will be the support, how much will people get and who will get, are questions that are being worked out right now. When the PM can stand at the Red Fort and say I will double farmers income without any substantiation, why cannot we make a manifesto promise without being expected to show a cabinet response with it? And I can say as someone involved in the process, with Mr Chidambaram, that there’s thought that has gone into it. The details will be in the manifesto."
"It will be on a household basis", he further explained.
The Economic Survey 2016, however, clearly explained that the cost of such scheme is unaffordable also the ruling government cannot withdraw "subsidies" for the poor and middle class. The 2016 survey said had estimated the cost at 4.9% of GDP, estimates suggested that the cost could be Rs 2.4-2.5 lakh crore per annum, if five members of the poorest 25% households were guaranteed a minimum basic income.
However, former CEA Arvind Subramanian believed that such scheme in Indian dynamics is possible. The Economic Survey 2016 document had suggested that if those with ACs, cars or bank balances above a certain level are excluded from the scheme then the plan's cost would be curbed and it could be implemented.
It further suggested that the list of beneficiaries of UBI scheme should be made public.
On the other hand, some business organizations had already expressed their fear over Rahul Gandhi's plan. The main concern is about the tens of billions of dollars it would be expected to cost will mean higher taxes and reduced spending on badly needed infrastructure such as roads and railways.
"We are against such freebies," said Pronab Sarkar, head of a tour company in Delhi and the president of the Indian Association of Tour Operators.
"These could be funded only through higher taxes on industry and the middle class," he told Reuters.
Congress said much of the cost of the guaranteed income scheme could come from savings made by cracking down on tax evasion and ensuring existing subsidies on staples such as food and fuel went only to those who qualified.
S.C. Ralhan, former head of the Federation of Indian Exporters Organisations (FIE), and a leading engineering goods exporter through his company Sri Tools, said India could not afford the minimum income guarantee as it would have to be paid for by businesses and individual taxpayers.
"Congress party's electoral promise could tilt traders' and urban middle class voters towards Modi, since they would have to bear the economic pressure," said Praveen Khandelwal, secretary general of the Confederation of All India Traders.
Private economists and the rating agencies also warned that Congress's proposed income support scheme, if carried out without replacing current welfare programs, could widen the deficit further.
(With inputs from Reuters)
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 "Minimum Income guarantee: Can India afford it and why businessmen fear Rahul Gandhi's plan")
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