Rahul Gandhi recently announced Nyuntam Aay Yojana (NYAY) the Congress’s minimum income scheme. The scheme promises to hand out, through direct (unconditional) cash transfers, Rs 6,000 per month to the poorest 20% households (about five crore families). This comes up to Rs 72,000 annually and is a flat transfer to the targeted poor households.
NYAY appears to parallel, in certain important respects, the NDA government’s PM-KISAN scheme. If the latter’s success depends on reliable land records and rural banking infrastructure, the success of NYAY will depend on reliable income records and access to banking facilities. The landless, who are not eligible for the PM-KISAN scheme, are placed in contrast to the land-owning small farmer. Similarly, with the difficulty of obtaining reliable income data, a scheme like NYAY may place the formal worker in contrast with the informal worker; workers in the formal sector may disproportionately benefit from NYAY due to the notoriously elusive income data for unorganised sector workers (who account for over 80% of the labour force).
In fact, the last accurate income dataset available was released by National Sample Survey Office in 2011-12 as the relevant dataset by the Labor Bureau in 2015-16 is presented as a range. It is not certain how the 20% will be identified and the estimate is disappointingly low, not even meeting the sub-standard requirements set out by the outdated Tendulkar committee at 21.9%. States like Tamil Nadu, Chhattisgarh and Odisha have shown that the programmes which were wrought with leakages were able to function much better after their universalisation.
Successful cash transfers linked to welfare
Most countries that have experimented with the idea of a cash transfer scheme, in some form, are countries where the state recognises the need for a strong welfare framework. In 1997, Mexico implemented a large-scale conditional cash transfer scheme (CCTS). It started off as Prospera and evolved into Progresa. Inspired by Mexico, Brazil introduced Bolsa Família (BF) in 2003. Both Progresa and BF are CCTSs where transfers are made, provided families take positive steps towards school enrolment and availing basic healthcare services.
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Both countries enjoyed improvements in social indicators including increased school enrolment rates, decreased school drop-out rates and significant health and nutritional improvements among both children and adults . Brazil saw a 15% decrease in its Gini coefficient – a measure of inequality – due to BF. Prospera benefits about a fourth of Mexico’s population, and, a decade after its initial implementation, BF reached a fourth of its total population. The success of the schemes in Central and South America depended on certain crucial components: recognition by the state for the need to provide subsidised education and primary healthcare.
Without acknowledging, in practice, the importance of universal access to basic services such as health, education, housing and unemployment allowances, the cash transfers made under NYAY will ultimately benefit private enterprises due to the lack of strong public institutions. Private institutions satisfying their profit motives along with providing subsidies for citizens, who cannot afford to pay for services, have proven to be incompatible.
Not only has the current economy driven up precarious and informal employment with persistent low wages, a stable environment for the ownership of capital has also been created. A consequence of decreased wages is decreased consumer demand. In brief, this is the profitability crisis of the capitalist system. Cash transfers appear to be the quick fix needed to remedy the problem of deficit consumption demand. Thus, at this juncture, one may be tempted to ask if a scheme like NYAY is intended to push the neoliberal agenda of creating an ever-expanding market for private enterprises.
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If the cash being provided is not able to enable the citizens to access much-needed services like affordable education and healthcare, that neither the government nor the private sector is able to provide, then how are the developmental goals of the nation being fulfilled? Thus, it is important that NYAY should not be de-linked from a broader developmental perspective that incorporates basic services such as healthcare and education.
Why PPEs are not the answer
India’s track record in the health and education sectors has been quite deplorable. The government expenditure on health, which falls well below the world average, has shown a complete lack of commitment thus far. In its recently released manifesto, the Congress party, with regard to education, seems to reflect a healthy attitude. But unlike Mexico and Brazil, the proposed cash transfer scheme is not linked to regular school attendance.
In relation to health, Congress has indicated that it will double expenditure to 3% of the GDP while upholding the universal healthcare model – through a right to health – a relief from the NDA government’s insurance model. Although this indicates a right step towards recognising and addressing health inequalities in India, the Congress’s resolve to “restore an open, liberal market economy” seems to indicate a tacit initiative of setting up private-public enterprises (PPE) which will unequivocally favour private interests at the expense of social ones. Not only do these PPE’s restrict access by favouring the privileged, but also provide services at an increased cost.
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Tamil Nadu and Rajasthan circumvented this problem, with improved public services by distributing free medicines which broadened access and kept market prices in check. Thus, public institutions should be strengthened so that they are able to regulate private institutions. This will bring about the much needed structural transformation which is a prerequisite for a scheme like NYAY to work.
Given that the infrastructure for the Mahatma Gandhi National Rural Employment Guarantee Act is already in place, expanding it will offset the burden on a scheme like NYAY. This is in line with what has been proposed in the manifesto – to extend the guaranteed working days to 150, in cases where 100 days have been achieved. This further goes to show the mutual support welfare schemes lend to one another.
In its current nascent form, NYAY raises several other important concerns despite considerations regarding the efficient functioning of the public welfare system. The resources needed for its implementation could be generated from an increase in taxation and a decrease in subsidies to the wealthy. With regard to issues of funding, in a recent article, Jean Drèze argues that a small tax on the wealthiest 0.1% could generate revenue of about 1% of the GDP, and NYAY requires close to 2% of the GDP.
Despite acknowledging the need for progressive taxation, there is no mention of a wealth tax in the party’s latest manifesto. Moreover, the wealth tax is a healthier alternative to the proposed ‘rationalisations’ which would jeopardise the already limited social security that is in place.
Also read: How Beneficiaries for the NYAY Scheme Can Be Identified
Another concern which may come up at this point pertains to the income transfer itself. Is the amount of Rs 6,000 per month pegged to inflation, to keep its real value in check? The basis for this needs to be addressed as there is the problem of a lack of price data or rather the availability of fragmented data.
A thorough survey of income characteristics across geographies is required to ensure proper implication in varied states. Similarly, the problem of identity among migrants who lack ration or Aadhaar cards also needs to be addressed. It is important to keep in mind that superficially implemented cash transfers take a simplistic, ill-informed and outdated view of poverty that will ultimately lead to diminished long term benefits.
Meghana Prasad and Nikhil Ravipati are independent researchers who completed their undergraduate studies in economics and physics respectively from the school of liberal studies at Azim Premji University, Bengaluru. The authors would like to thank Rajendran Narayanan for his comments and suggestions.