Congress President Rahul Gandhi has announced a minimum income of Rs 6,000 a month or Rs 72,000 a year for 20 per cent of families belonging to the poorest category.
According to the Central Statistics Office, there were 24.95 crore households in India in 2011. The bulk of the money would go to rural India, which accounted for a total of 16.87 crore households in 2011. There were 8.08 crore total urban households.
Assuming every household in the bottom 20% is eligible for the income, it would translate into a total expenditure of Rs 3,60,000 crore (five crore multiplied by Rs 72,000) a year. This is more than six times the outlay of Rs 55,000 crore under the NREGA in 2018-19.
While it is not clear if this minimum income guarantee scheme would subsume any other subsidy should Congress come to power, this scheme alone would add 1.9 per cent of GDP to the fiscal deficit.
In fact, the outlay could be higher than India’s health budget, which is estimated at about 1.4% of GDP.
The macro-economic impact of such spending would be three-fold: i) on growth – such spending would give a mini-boost to consumption expenditure, because the poorest will spend the money on basic needs, ii) on inflation – prices may tend to go up with higher consumption demand, and iii) on the fisc – it could result in higher cost of government borrowing and lead to higher fiscal deficit if subsidies are not rationalised.
While announcing the scheme, Gandhi said it will “wipe out poverty from the country”. “The final assault on poverty has begun. If anyone’s salary is less than Rs 12,000 per month, we will ensure he gets that amount,” he said.
Taking a swipe at Prime Minister Narendra Modi, Gandhi said, “If PM Modi can give Rs 3,50,000 crore to India’s richest, then we can do the same for India’s poorest.”