So, it is the first set of three manifesto promises that will have far-reaching impact on governance, economy and lives of people in India and, therefore, deserve closer examination.
This is not one single election nationwide but 543 elections in so far the issues before the voter are concerned. Even then, joblessness, farmers’ distress and lack of basic amenities for millions of Indians in the fastest growing major economy in the world are real issues of voter concern nationwide.
The Congress manifesto seeks to draw the focus back to these real issues. That said, does it come up with real viable answers? Or does it land up making false, undoable promises– just empty slogans or “jumlas”?
Three key elements in the Congress manifesto are– 1. NYAY or the Minimum Income Guarantee by way of cash transfer of Rs72,000/year to the bank account of each of the poorest 20% families; 2. increase in public spending on education to 6% of GDP and on public health to 3%; and 3. expansion of the size of government staff strength by at least 32 lakh fresh recruits. These three have a direct impact on the government’s budget and on the Indian economy as a whole.
It is not clear what practical differences will be made by the two other major promises in the manifesto, beyond their slogan value. A separate Kisan Budget is talked about, but in the absence of specific steps to raise farm production, productivity, income and employment, it is of little practical value. Similarly, the three-year tax-holiday and freedom from clearances promised to business start-ups are impractical ideas and unworkable on the ground. How can the promised bank finance and government incentives be extended to the new entrepreneurs without any registration, known equity capital, land holding, power connection, environment clearance or the like?
So, it is the first set of three manifesto promises that will have a far-reaching impact on governance, economy and lives of people in India and, therefore, deserve closer examination.
To begin with, the impact on government finances will be huge. Even if NYAY and the expansion of public spending on education and health is staggered in phases, they will have a big expansionary impact on the government and the economy.
India would be entering a period of high growth and hyperinflation, no matter whichever way these programmes are financed.
Today, the Centre alone has a deficit of 3.4% of India’s GDP that is funded through government borrowing. This 2018-19 revised estimate of government borrowing is, in fact, a gross underestimation. The actual would turn out to be at least 4% of GDP. This figure could easily touch 10% for the Centre alone if the three budget expansionary programmes promised in the Congress manifesto are actually undertaken.
The scope for additional taxation is limited. Although a fast growing economy will also bring about a certain revenue buoyancy for the government, the expenditure on NYAY and public education, as well as health, will take the Center’s borrowings to very high levels. Even if the states are also roped in to fund the programmes partly, the impact of Big Government overall will be vastly expansionary.
The other issue with Congress manifesto’s flagship NYAY is that it is being given as a handout or a dole to the poor rather than as a minimum earning guarantee like in MNREGA. While a direct cash transfer of Rs 72,000 to the bank account of the homemaker of 50 million poorest households will have a tremendous impact on consumption demand at the bottom of the pyramid, a job guarantee programme would have been not just unproductive consumption expenditure but capital investment in the economy.
Although there is a strong case of inclusive development and redistributive justice in NYAY, there is a real danger of the government borrowing unsustainably to finance such programmes of cash handouts.
By Priya Ranjan Dash