Congress confused over NYAY; scheme cutoff nothing but updated Tendulkar formula

By: |
Updated: Mar 28, 2019 7:23 AM

Congress consulted extensively with economists to define minimum income for NYAY—-all it did, really, was to update the tendulkar poverty line to today’s prices

Congress, Congress NYAY, NYAY scheme, PAP, Rahul Gandhi, Manmohan Singh, P Chidambaram, congress scheme for poor, UPA government, A top-up proposal would mean that the new UPA government, if brought back to power, would help lift every family residing in the bottom 20% to reach an income level of Rs 6,000 pm. (PTI)

For two and a half days, the media was full of discussion, and interpretation, of the Congress’s proposal to alleviate poverty (hereafter pap or PAP). In addition, the Congress, and its president, Rahul Gandhi, have not been shy of invoking big names in their advertisement and support for, and planning of, PAP. Raghuram Rajan has been prominently mentioned as a major consultant; Piketty has admitted to having been consulted, though Nobel laureate Angus Deaton has emphatically denied having been involved in any way whatsoever. In addition, leading MIT economist, Abhijit Banerjee, has admitted that he has been consulted by the Congress party. Finally, as per a report in Business Standard on January 27, 2019, “A committee of party leaders, which included Manmohan Singh and P Chidambaram, has calculated [that] the basic living income each family needs to survive is Rs 12,000 per month”.
It is quite clear that the Congress believes that PAP is unique, innovative, and a game changer and, according to Chidambaram’s press conference, the total expenditure involved in implementing PAP will not exceed 2% of GDP. Initially (for the last two days), there was intense speculation, and debate, in the media about whether the programme was a top-up proposal or a straightforward grant of Rs 72,000 per family per year or Rs 6,000 per month (pm). Here is the first bit of confusion in the PAP proposal—the Congress believes that Rs 12,000 a month (or Rs 144,000 a year) is the survival income needed but is promising to give only half that as its income guarantee. But wait—there is an explanation for how Rs 6,000 per month is the ‘survival’ income needed per family. ‘Survival’ income is nothing more, or less, than the poverty line income!

Also read| Rahul Gandhi promises NYAY, ‘real GST’ day after announcing new scheme for poor

A top-up proposal would mean that the new UPA government, if brought back to power, would help lift every family residing in the bottom 20% to reach an income level of Rs 6,000 pm. Hence, if a family earned Rs 4,000 pm, the government would transfer Rs 2,000 every month into the bank account of the designated woman in the family. Chidambaram was quite emphatic (in his press conference) that the Congress would follow the Modi government’s policy of transferring money into a woman’s account. According to this first PAP plan (PAP1), if a family earned Rs 72,001, there would be a zero-rupee transfer, and zero as well for all families earning above Rs 72,001 a year. Incidentally, as widely reported and viewed, PAP1 was revealed to the world by none other than Rahul Gandhi himself.

Then came a contradiction of the Congress president by their spokesperson, Randeep Surjewala, who categorically stated that PAP1 was not a top-up but a straightforward grant of Rs 72,000 to every family whose income fell below Rs 72,000 a year. Let us call this proposal PAP2. While Surjewala did not say so (I haven’t heard), a clear implication of PAP2 is that his supreme leader could not tell the difference between a top-up and a grant. I don’t believe that Gandhi could not understand the difference. I believe it was a straightforward case of confusion within the Congress party about which proposal to advocate—and a confusion between the poverty line income of Rs 6,000 per month and survival income of Rs 12,000 per month.

I am going to painstakingly document the intellectual and policy folly of both PAP1 and PAP2. I hope to make clear why I think none of the economic luminaries mentioned above will ever admit to supporting either PAP1 or PAP2. Very likely, and I am speculating, it was because of the opposition of Congress’s economic consultants that there were glaring and obvious contradictions in the Congress’s Minimum Income Guarantee (MIG) income, and the contradiction between survival and poverty line income.

I have written several articles over the last few months documenting the existence, and prominence, of the fake news (especially fake economic news) campaign of the Congress. In my book, Citizen Raj-Elections 1952-2019 (to be released in mid-April 2019 by Amazon—Westland), I document how fake economic news has been in operation since January 2015, barely seven months after Modi won a historic election. Let me now document all my assertions so that there is no doubt that whatever I say is backed by hard numbers, and logic (as I always attempt to do). You can easily decide whether my assessment is a jumla upon jumla, or hard facts versus jumla. I am afraid this task will occupy a full two articles, but I promise to keep you hooked!

The first fake news element within PAP is in its assertion that prominent economic experts were involved in arriving at the figure of Rs 72,000 a year or Rs 6,000 a month as the minimum income line. This is because Rs 6,000 a month is exactly an update of the Tendulkar poverty line, and this official minimum income line has been in existence for more than a decade. This is shown below at an all-India level. Research on estimating the Tendulkar poverty line for each urban and rural area of the country is presently underway by Arvind Virmani, former chief economic adviser, Government of India, and myself.

Most readers can skim or skip the next two paragraphs but they are provided as evidence that the Congress poverty line is nothing more, or less, than the official poverty line in India.The Tendulkar poverty line in 2011-12 for rural areas was Rs 853 per capita per month (pcpm). For urban areas, the national average was Rs 1,000 pcpm. Rural CPI average for July 2011 to June 2012 (the NSSO months) registered a level of 95.0; urban CPI registered 95.7; for 2017-18 (same months), the corresponding levels are 138.6 and 133.7, respectively. For both 2018-19 and 2019-20, an average inflation of 4% is assumed. This yields rural and urban CPI levels of 150 and 145 in 2019-20. The corresponding 2019-20 Tendulkar poverty line is therefore Rs 1,347 pcpm (rural) and Rs 1,515 pcpm (urban).

The urbanisation rate in 2019-20 remains to be determined. Leaked PLFS reports suggest that India had an urbanisation rate of only 29.3% in 2017-18, even lower than that observed in 2011-12! One of the many problems with the PLFS data (but unremarked upon by most (all?) commentators) is the low rate of urbanisation observed in 2017-18. If this urbanisation rate is taken as accurate, then the national Tendulkar line in 2019-20 is Rs 1,396 per person per month. Accepting this figure yields an average family size of 4.3 for India (6,000 divided by 1,396). While this seems low, it apparently is identical to the PLFS estimate of family size in rural India, a poverty benchmark region used by international agencies like the World Bank. Hence, what the Congress has proposed is a transfer of poverty line income to each family—and half of survival income!

Part 2 of the PAP jumla will document how a top-up scheme in 2019-20 will likely involve an additional expenditure level of less than 0.2% of annual GDP and how, in 2019-20, the Tendulkar poverty level in India will likely be less than 5% of the population, and how the grant proposal will lead the Congress in benefitting 20% of the population and alienating the population who are in the next 30% (21% to 50%). It doesn’t seem as if this is an intelligent election strategy. But whom am I to comment? I only supported Manmohan Singh as PM in the 2009 election.

The author is Contributing editor, Indian Express and consultant, Network 18. Views are personal
Surjit tweets @surjitbhalla

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Rational Expectations: Budgeting right, to regain investor trust
2How much more FX will RBI buy?
3China might get ahead of even the US in Science and technology; what India must do?