lok-sabha-elections

Updated: Mar 26, 2019 09:57 IST

The Congress’s promise of a minimum income guarantee, details of which were revealed by the party on Monday, is the highest among some recent estimates of how much the poor could be given as income transfer by the government and what it would cost.

The party has set a minimum income guarantee line of Rs 12,000, akin to a poverty line. The party also assumes that any Indian household should meet this monthly income threshold to escape poverty.

According to details available so far, any deficit from the minimum income line, depending on where a household is placed on the income-distribution ladder, will be made good through an income transfer.

The programme promises the lowest quintile (or the poorest 20% households) a monthly income transfer of Rs 6,000, assuming this will pull them up to the level of at least Rs 12,000.

According to party’s calculations, the poorest 20% translates into 250 million people or 50 million households. Targeting the poorest quintile will ensure no household will have an income below Rs 12,000, according to the party’s internal estimates.

There are two broad official estimates of poverty: the Suresh Tendulkar poverty line, in 2009, which was criticised for being set too low at Rs 4,050 per household per month in rural areas and Rs 4,950 in urban areas. It was reworked by the Rangarajan Committee in 2012. Neither poverty line, however, is now used for anti-poverty programmes. Rather, the government uses the Socio-Economic Caste Census (SECC).

The number of households targeted by the Congress closely approximates that of the Rangarajan poverty estimates. According to the Rangarajan panel, about 29.5% of Indian population (or 269 million people) are below the poverty line, which was revised to Rs 4,800 a month for a household of five in rural areas and Rs 7,050 a month for a household of five in urban areas.

Experts say it will be difficult to determine household incomes. Policymakers now use household consumption expenses as a proxy for income data.

“Household income data at the national level doesn’t exist. Such data do exist at the state level compiled by state statistical bureaus, which then have to be cleaned up by Central Statistics Office,” said economist Amitabh Kundu. People tend to their underreport incomes, he said.

“Income data are available. We do have a sense of the income distribution. How do you think inequality figures are arrived at? There is the Centre for Monitoring of Indian Economy for instance. There is of course the SECC. That there is no official income data and therefore I can’t embark on a final mission to finish poverty is the most ridiculous excuse,” said Praveen Chakravarty, chairperson of the Congress’s data analytics department.

Congress president Rahul Gandhi has claimed there is fiscal space available for the programme. Yet, there will be considerable debate on this. The government’s spending and borrowings have to meet limits set by the Fiscal Responsibility and Budget Management Act, 2003

The Union government slammed the Congress promise as a poll gimmick. “Rahul Gandhi has talked about minimum income guarantee. Was Surprised. He has remembered the poor now? His grandmother had called for banishing poverty long ago. We thought poverty was gone,” Union law minister Ravi Shankar Prasad told ANI.

Soon after the Gandhi gave the details of the plan , finance minister Arun Jaitley called it a “bluff announcement” in a blog.

According to economist Gurbachan Singh of the Indian Statistical Institute, at 2019-20 prices, 1.5% of the GDP adds up to about Rs 2.82 lakh crore a year. This is roughly in line with one of the latest estimates for an income-transfer scheme by economists Josh Felman, Boban Paul, MR Sharan and Arvind Subramanian (1.3% of GDP).

“My sense is that it is doable. Given the focus of the Congress right now, it could devise a wealth tax or bring back the inheritance tax to fund it,” Singh said.