Former RBI Governor says minimum income guarantee scheme is good in theory but needs to take into account fiscal realities; also raises doubts about current GDP numbers
New Delhi: Congress President Rahul Gandhi on Tuesday said that former RBI governor Raghuram Rajan was among the top economists that the party had consulted before drafting its minimum income guarantee scheme. ‘‘We were engaged in this task for six months. Take the list of all big economists worldwide, we consulted them…Raghuram Rajan…one by one,” Rahul said.
“First thing, we came to know was that there should be a minimum income line. We calculated and the result was that the minimum income line should be 12,000 per month,” he said. However, Rajan, while speaking to India Today TV, remarked that the minimum income guarantee scheme is good in theory but needs to take into account the fiscal realities.
So, even as Rajan agreed that the scheme will promote growth at the grassroots level, he remained sceptical about whether the economy can afford it. The scheme will entail an expenditure of Rs 3.6 lakh crore over and above the existing Rs 3.34 lakh crore expenditure outlined by the Modi government in the 2019 budget.
Since the Congress has announced that the scheme will not subsume any existing government poverty alleviation schemes, it would mean the government would be spending Rs 6.94 lakh crore on subsidies, if the Congress comes to power. However, Rajan told India Today, if implemented properly, the Congress’s minimum income guarantee scheme can “revolutionise things.”
“There are ways of structuring the scheme in a way that it creates growth at the grassroots level. It will allow people to make financial decisions on their own. The question is how it will roll out. Will it add on to existing schemes, or will it revolutionise things? We have a chance to target poverty alleviation effectively.
If done effectively it [NYAY scheme] can change how things are run” said Rajan. Rajan also expressed doubts over Indian economy growing at 7 per cent when not enough jobs were being created and said the current cloud over the GDP numbers must be cleared by appointing an impartial body to look at the data.
Rajan, who has also served as Chief Economist at the International Monetary Fund, said he had no idea what statistics are pointing at currently and “a revamp” was needed “to really figure out what India’s true growth rate is”. “I know one minister (in the Narendra Modi government) has said (that) how can we be growing at 7 per cent and not have jobs. Well, one possibility is that we are not growing at 7 per cent,” he told CNBC TV18.
He did not name the minister. Finance Minister Arun Jaitley has been stoutly defending the growth data, saying an economy cannot be growing at 7-8 per cent without creating jobs. He has also stated that no major social agitation indicates it hasn’t been jobless growth.
Rajan said a stronger broad-based growth is needed that creates more jobs. Speaking to NDTV, he suggested that the government should introspect on some of its decisions like the controversial note ban. “… Self-examination is something that every government must do for better governance and efficiency,” the renowned economist was quoted as saying.
