The scheme can be implement by offsetting existing subsidies and schemes, which amount to 3.2 per cent of GDP.

It could be done by compromising on capital expenditure, worth 1.6 per cent of GDP annually.

Additional taxes or cesses can be imposed to fund this additional expenditure.

NEW DELHI: Economist and former RBI Governor Raghuram Rajan on Wednesday told Supriya Shrinate of ET NOW that the Congress party consulted him on the proposed minimum income scheme, dubbed NYAY Noting that agriculture distress and poverty are two sources of stress in the economy, Rajan said there would be a need to create fiscal space for this scheme.On Monday, Congress chief Rahul Gandhi promised an annual minimum income of Rs 72,000 to 20 per cent families in the poorest of the poor category, trying to win votes in the forthcoming elections.At Rs 3.6 lakh crore, the outgo under the scheme is projected to be three times India’s fiscal deficit, six times the defence budget and two times corporate tax receipts.While other economists and policy makers have put a question mark in the fiscal viability and feasibility of the scheme that the Congress, Rajan said fiscal space can be created for the same. “It’s important to create room for those schemes, which are actually effective,” Rajan told Shrinate.He said there is no reason why the Congress consulting him should be seen through political prism.He said direct benefit transfer has been a common theme between the last two governments. It is a poverty alleviation scheme, which both coalitions have signed on to, he said.Rajan said it is important that schemes offered to poor do not hold them back from job hunting. The basic idea, he said, is to target the poor and give them an ability to create good livelihoodNomura India on Tuesday said it is not entirely clear if the Congress intends to simply offer a flat transfer of Rs 6,000 per month per household or bridge the income gap to Rs 12,000.“Income-linked targeting of households may prove to be very complicated, as it would involve the government keeping tabs on earnings of millions of households that largely operate in the informal sector of the economy. While Congress chief Rahul Gandhi has mentioned that households will be excluded from the scheme once they cross the income threshold, the party has also commented that it would be a flat transfer across households independent of income,” the brokerage said.Besides, it is not immediately clear how much of this scheme will come at the cost of other public expenditure. Can such a scheme be implemented without sacrificing fiscal prudence?Nomura says it can be done in three ways:At present, the government splits this roughly equally between centrally-sponsored schemes (1.6 per cent of GDP) and subsidies on food, fuel and fertiliser.“There are reports that the Congress is contemplating subsuming smaller subsidies for the poor such as old-age pension or increasing prices of subsidised foodgrains for the poorest and make fiscal space from food subsidy outlays,” the brokerage said.“This will, however, severely impair the capex cycle, as public investment has been the driving force behind the economic recovery. Every 0.1 per cent of GDP cut in public capex is estimated to shave off ~0.2pp from GDP growth,” Nomura said.