Home Economy and Finance Rahul Gandhi's Minimum Income Guarantee could kill all other subsidies and be the mother of all scams

Rahul Gandhi’s Minimum Income Guarantee could kill all other subsidies and be the mother of all scams

What’s the worst that could happen to India?

Rahul Gandhi has announced that the government will provide minimum income support to the poorest 20% of Indian families. Here are some simple, common sense thoughts on where this 3.6 lakh crore disaster would lead.

(1) Common people are going to lose every other subsidy on gas, fertilizer, electricity, crop prices, MNREGA and health

Suffice to say that India doesn’t have 3.6 lakh crores just sitting around. The money will have to come from somewhere. From where? Obviously, they are going to have to remove every other subsidy. That could mean no more subsidy on gas cylinders, no more subsidy on electric connections and the government won’t be able to pay for health or education.

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Worse, the government will probably have to end MNREGA, end the minimum support price for crops and end all fertilizer subsidies. Where does that leave the Indian farmer and the rural poor? This would also mean an end to government programs that provide cheap foodgrains to the poor. And also an end to cash transfer schemes such as pensions for the elderly in many states.

Think about all farmers who receive cheap or subsidized electricity. That’s coming to an end for sure.

The hope for Rs 72,000 per year will probably end up costing the poor their gas subsidy, their electricity subsidy, the minimum support price, the fertilizer subsidy and access to cheap foodgrain.

‘Pie in the sky’ is always the most expensive of all.

(2) Implementing the scheme in any form will lead to babus creating the greatest scam in history.

Here’s how. Remember that Rahul is not promising a specific amount of money, merely the DIFFERENCE between Rs 12,000 per month and your household income.

In other words, a household which already earns Rs 11,500 a month will be entitled to just Rs 500 per month.

The question is: how do you make the poorest of the poor in our society provide documented proof of income?

It is not hard to see where this is leading. This will have to be done on a “declaration basis”: the income of a poor person will be whatever the sarkari babu allows him or her to put down on the form.

Imagine this:

A poor person earns just Rs 5,000 a month. As per the scheme, he is supposed to receive Rs 12,000 minus Rs 5,000 or Rs 7,000 a month. He arrives at the government office to ask for Rs 7,000 of “income support”.  The sarkari babu in charge has two options: he could just accept the person’s claim at face value and hand the person Rs 7,000. Or he could say that the claim “needs verification” and keep it pending forever. 

Anybody who has lived in India knows what will happen next. The poor person will be asked for a bribe in order to “pass” the claim. There goes at least 2000 of the 7000 the person was supposed to receive.

Multiply this number with the crores of supposed “beneficiaries”. This could be a scam the likes of which the world has never seen.

Remember that these are supposed to be the poorest and weakest in our society. Leaving them at the mercy of the sarkari babu is almost horrifying. Stripping these people of their gas, electricity, fertilizer, crop support, health and education subsidies and making them stand in line to pay bribes … it’s just cruel.

(3) The scheme will actually cost at least WAY more than 3.6 lakh crore and will likely bankrupt the country

This happens in at least 4 different ways:

(a) Think about it. If you declare an income of Rs 11,000 a month, you get just Rs 1,000. If you declare income of Rs 1,000 a month, you get Rs 11,000. There is no proof needed to establish your income and you will have to a hefty bribe to the officers anyway for them to pass your claim.

So what happens? Crores of people will end up declaring tiniest possible amounts of income in order to get maximum benefits. The calculation of 3.6 lakh crore goes for a toss because crores of people will declare an income of ZERO in order to claim the full Rs 12000.

So here’s the *real* calculation (at least):

5 crore families

12000 per month

12 months per year

Comes to 7.2 lakh crores per year. And we are just getting started.

(b) Remember that the amount is paid per family. Rahul says the scheme will benefit 25 crore people living in 5 crore families. So the assumption is 5 people per family. Let’s assume that means 3 adults and 2 kids.

But who decides what is a family?

If the 3 adults in the family are together making Rs 6,000 a month, their family gets just Rs 6,000 per month as income support.

It isn’t hard for the 3 adults to figure this much out: if each of them decides to declare themselves a “family” with an income of Rs 2,000 each, each adult will now get Rs 10,000 per month as income support. Each adult! That means the three adults can now make Rs 30,000 per month from this income support scheme.

Yeah, so remember that 7.2 crore outlay needed for “5 crore families”? Each adult in each of the 5 crore families will declare themselves a separate family.

Overnight, therefore, the “5 crore families” will swell to “15 crore families”.

So take that 7.2 lakh crore outlay calculated above and multiply it by 3: comes to 21.6 lakh crores!!

We are still not done.

(c) This number of Rs 21.6 lakh crores will zoom even further, for obvious reasons. People who are just above the Rs 12,000 threshold will have an incentive to claim to they are also below the threshold. Remember that again these are among the poorest in society and have no real documented proof of income.

So take that “5 crore families” and make it “10 crore families”. Now split each family into three “families” as explained above.

The new figure: Rs 43.2 lakh crores.

(d) And we are still not done! I leave it to your imagination the number of fake bank accounts that will be created in order to access this scheme several times over. Remember that as per SC judgement, Aadhaar number is no longer needed for bank accounts.

So we end up with a simple estimate for Rahul Gandhi’spromise: Rs 45 lakh crores.

In 1971, Indira Gandhi coined the slogan “Gareebi Hatao”. But poverty was not removed. It was made deeper than ever.

In 2014, half of the Indians still didn’t have toilets. Half of the Indians still didn’t have cooking gas. There were 3 crore households without electricity.

Why? Why did this happen despite 50 years of the Dynasty rule?

For the Dynasty, 2014 was the darkest moment ever. India was kept frozen in poverty for use at just this very moment. So that a promise like this could be made to mobilize voters and help the dynasty recover from its darkest hour.

So what if it costs Rs 45 lakh crores?

What’s the worst that could happen to India?

India would go bankrupt and starving? All the gains since 1991 would be wiped out?

Who does that help? Who does it help if India returns to the depths of pre-1991 poverty?

Didn’t the Dynasty enjoy near uninterrupted power from 1947 to 1991?

Remember that India’s worst-case scenario is also the Dynasty’s best case scenario.

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