What Is Rahul Gandhi's NYAY Scheme For The Poor?

Rahul Gandhi has announced that if the Congress is voted to power, it would launch a new scheme for the poor called "NYAY".

What is the NYAY Scheme For The Poor?

The scheme has promised Rs 72,000 per year to 5 crore households. This would be for the poorest 20 per cent families in India. "This is a final assault on poverty," Rahul Gandhi said at a press conference, announcing that it will be called Nyuntam Aay Yojana (Minimum Income Scheme) or, in short, NYAY, which means "justice" in Hindi.

Already, according to some estimates there are several centrally sponsored schemes with a large budgetary allocations like the PDS, Urea and MNREGA being some of the biggest.

Can the Nyay scheme be fiscally prudent?

Sometimes, it becomes extremely difficult to analyze, without adequate facts. The most important fact that is missing is: would the NYAY subsume other government schemes, like the Mahatma Gandhi National Rural Employment Guarantee Act.

If not, then it may not be fiscally prudent, given the fact that the NYAY would cost an estimated Rs 3.6 lakh crores to be implemented. This would pose a huge fiscal burden on the government. This amount is estimated to be a staggering 12 to 13 per cent of India's Budgetary allocations. When the fiscal deficit balloons, there are other implications including a rating review by the global rating agencies.

How the NYAY will impact the economy?

When you put that kind of money in the hands of the poor, it could certainly boost income and lead to inflationary trends. Of course, it would lead to a pretty decent acceleration in GDP and growth. Many companies that are focussed on the rural economy would see demand for their products rising. However, if it remains inflationary, we could witness an increase in interest rates.

Will the scheme go down well with the electorate?

This is something that is always difficult to analyze. Of course, there can be only gains made from announcing the scheme, there is unlikely to be any damage. However, Congress President Rahul Gandhi has said that in the past the Congress Party has promised and delivered.

He talked of states like Madhya Pradesh, Rajasthan and Chattisgarh, where they had promised loans waivers for farmers and had gone ahead and implemented the same. Initially, when the scheme was announced we saw some sell-off in the stock markets, which saw a threat to the ruling NDA.

If the Congress unleashes a decent campaign, through the language media in poorer towns and cities, it could have an impact, especially where there is a direct fight with the BJP.

For some sections of the people, especially farmers, it could come as a breath of fresh air, especially after rural distress.

Arguments against the scheme

Many argue that the scheme will provide an incentive for individuals not to work and also be fiscally unviable. However, the Congress President has clarified that they have already done their maths. In any case, it is too early to say anything, we first need to see the outcome of the General Elections. For the time being, the ball is in the people's court.