Economist Abhijit Banerjee, who advised Congress on the ambitious NYAY scheme ahead of 2019 general elections just won Nobel Economics Prize. During the run-up to 2019 elections, Banerjee had said that should Congress-led UPA come to power, the NYAY will have to funded by new taxes. He had said that at present India’s fiscal deficit is so large that the scheme is simply not sustainable without raising taxes.
Amusingly, then Congress President Rahul Gandhi while thumping his chest about the ‘free money’ scheme had been insisting that no new taxation would be levied to implement the welfare scheme. He had also said that should NYAY be implemented (if Congress-led UPA comes to power), a lot of current existing welfare programs would have to be scrapped.
Abhijit Banerjee had said that many of the current schemes have no purpose, and nobody knows what their purposes are, and they will be replaced by Congress’ 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.
In the run-up to the Lok Sabha elections 2019, then Congress had announced in its manifesto a “Minimum Income Guarantee Scheme”- formally called Nyuntam Aay Yojana (NYAY), to five crore ‘poorest families’ covering 25 crore people by assuring them a guaranteeing minimum income of ₹6,000 per month or ₹72,000 a year. However, the exact amount promised kept changing with every rally of Rahul Gandhi. Sometimes it became ₹ 72,000 annually, sometimes it was ₹ 72,000 monthly. At times it has been said that the government will “top up” the income of the poorest by paying the difference as “minimum income support”. At other times it has been called a flat transfer of a certain amount of money, which has again varied from ₹ 72000 a month to ₹ 72000 a year.
Banerjee has just won a Nobel Economics Prize along with Esther Duflo and Michael Kremer for “their experimental approach to alleviating global poverty.”
Banerjee, who is currently the Ford Foundation International Professor of Economics at Massachusetts Institute of Technology, had also said that India has been hurt by low inflation during the NDA government, and that the budgets of NDA government are not viable. He had said that stopping the “inflation tax” by the NDA government has hurt the economy badly.
The noted economist had also 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.