Rahul's income plan for poor may cost more than Budget 2019's subsidy bill

If fully implemented, Rahul Gandhi's proposed minimum income guarantee scheme, or NYAY, would cost more than Interim Budget 2019's total subsidy expenditure of Rs 3.34 trillion. Its envisaged annual outlay, at a reported Rs 3.5 trillion, would amount to about 1.7 per cent of the Budget's estimated GDP for 2019-2020 at Rs 210.07 trillion -- or about half of the fiscal deficit for 2019-2020 at 3.4 per cent of GDP.

Congress President Gandhi on Monday said that if his party were to come to power at the Centre, it would provide a minimum income of Rs 6,000 per month to 20 per cent poorest households.

At its peak, the cost of the Congress' proposed scheme would be nearly six times the 2019-2020 Budget Estimates for the outlay on the Mahatma Gandhi National Rural Employment Guarantee Program (MGNREGA) at Rs 60,000 crore. In January 2019, the government made an additional allocation of over Rs 6,000 crore to MGNREGA, taking the total allocation to Rs 61,084 crore, which was highest ever in a financial year. Congress reportedly intends to continue MGNREGA even if the minimum income plan is implemented. 

It would also amount to over 4.5 times the cost of the Rs 75,000-crore Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) scheme. Under the latter, Rs 6,000 per year would be disbursed in three instalments to around 125 million small and marginal farmers who hold cultivable land of up to two hectares.

However, this estimated Rs 3.5-3.6-trillion expenditure needs to be qualified. In an interview with Business Standard, Congress' data analytics department head Praveen Chakravarty explained that NYAY would require Rs 3.5 trillion "at the peak". Chakravarty has also said that the expenditure would not be more than 1.2 per cent of the GDP at its peak at any point of time. Further, the Congress does not reportedly intend to implement the scheme immediately if it comes to power after the Lok Sabha polls. Before the scheme is implemented, which will take place in phases, pilot projects might be reportedly run for at least two years. 

Still, amid questions on the proposed scheme's fiscal prudence, it would be relevant to see how it would stack up, if fully implemented, against other social sector allocations.

It would amount to nearly three times the Interim Budget 2019's allocation for rural development ministry at Rs 1.19 trillion, four times the Budget allocation for the education ministry at Rs 93,847.64 crore and five times the Budget allocation for the Ministry of Health and Family Welfare and AYUSH Ministry at Rs 65,037.88 crore.

It also dwarfs the 2019-2020 Budget Estimates for fertiliser subsidy at Rs 74,986 crore, for food subsidy at Rs 1.84 trillion, and for petroleum subsidy at Rs 37,478 crore. 

Niti Aayog Vice-Chairman Rajiv Kumar said Gandhi's proposed scheme would create strong incentives against work and burst fiscal discipline. Meanwhile, Finance Minister Arun Jaitley accused the Congress of "bluffing" the people.