Sunday, June 8, 2025
HomeEconomy and FinanceRahul Gandhi’s economist advisor says high inflation is good for economy, NYAY scheme will...

Rahul Gandhi’s economist advisor says high inflation is good for economy, NYAY scheme will be funded by high taxes and inflation

The economist said that stopping the “inflation tax” by the NDA government has hurt the economy badly.

As the main election promise for Lok Sabha elections, the Congress party has announced a minimum income guarantee scheme, the Nyuntam Aay Yojana (NYAY). According to this scheme, 20% poorest people in the country of 5 crore families will be paid Rs 72,000 per year. This means an outgo of Rs 3,60,000 crore per year, but the party didn’t provide details of how they propose to fund this massive scheme. Now noted economist Abhijit Banerjee, who advised the Congress party on the formulation of the scheme, has made some startling revelations about the thinking behind the scheme.

In an interview with Times Now, Banerjee said that the NYAY will have to funded by new taxes. He said that at present India’s fiscal deficit is so large that the scheme is simply not sustainable without raising taxes.

When asked whether the NYAY will have to be funded by a tax or a series of taxes, Banerjee replied, “that is correct”. He also said that India will have to have new fiscal resources, saying that the country is at present “undertaxed”. He said that India needs to desperately raise taxes irrespective of the NYAY scheme. He also talked about expanding the tax base.

When asked whether the scheme will be viable without increasing taxes, Banerjee tried to avoid the question saying that the economy itself is not viable without increasing taxes. Nothing is viable without raising taxes, he emphasised, implying that the minimum income guarantee scheme is also not viable without increasing taxes.


Banerjee also said that India has been hurt by low inflation during the NDA government, and budgets of NDA government are not viable. He said that stopping the “inflation tax” by the NDA government has hurt the economy badly. He said that during UPA government, although the interests were high, due to the use of “inflation tax” by the government, the share of government debt in GDP was falling. According to Banerjee, now that the NDA government is not using the “inflation tax”, it has meant there are few sources of revenue for the government.


Abhijit Banerjee also said that the implementation of NYAY will mean that lots of current welfare programs will have to be scrapped. He said that many of the current schemes have no purpose, and nobody knows what their purposes are, and they will be replaced by NYAY. He said that subsidies provided for fertilizer, power, water etc are distortionary subsidies, and they need to go. Banerjee said that these subsidies are not good for the economy, they are not good for efficiency.

From the comments of economist Abhijeet Banerjee, it is clear that for the Congress scheme to be implemented, the government will have to increase taxes, raise inflation, and scrap existing welfare schemes, something which Congress party is not telling the people while talking about it.

Join OpIndia's official WhatsApp channel

  Support Us  

For likes of 'The Wire' who consider 'nationalism' a bad word, there is never paucity of funds. They have a well-oiled international ecosystem that keeps their business running. We need your support to fight them. Please contribute whatever you can afford

Searched termsAbhijit Banerjee
OpIndia Staff
OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

Related Articles

Trending now

World Malayalee Council promotes tourism in Azerbaijan, which stood with Pakistan during Operation Sindoor, after Afridi was welcomed by another Kerala group in Dubai

The World Malayalee Council (WMC), an organization representing the global Malayali diaspora, has sparked controversy by announcing its 2025 Global Conference in Baku, Azerbaijan

Bangladeshi man who participated in ‘student protests’ turns out to be a voter in West Bengal, has connections with TMC, accused claims innocence

"He (Newton Das) must be a voter in Bangladesh. He was born there. He had come to India after Covid-19 outbreak to settle some land disputes. I do not know where he lives now. I don't know how he became a voter here," the accused's brother Tapas Das told TV9 Bangla.
- Advertisement -