How practical is the newly proclaimed promise called Nyuntam Aay Yojana ( minimum income guarantee programme) by the Indian National Congress, if voted to power in the 2019 General elections? What are the probable ramifications of this scheme? What will be its impact on small industries, rural and micro businesses and farming activities? Will it result in the final victory over poverty as claimed?
Poverty as a term has wide scope for interpretation. And it is easier to propose a solution to eradicate it. But without addressing the root causes of poverty, transferring money to one’s bank account can badly backfire. The poll promise called Nyuntam Aay Yojana (NYAY) is projected as “the final assault on poverty” and a surgical strike on poverty. The NAYA would transfer up to INR 72,000 every year to the bank accounts of about 50 million units.
What is missing in this is lack of a vision to identify and address the issue of poverty of opportunities for these millions. Poverty, in most cases, stems from lack of opportunities and therefore the challenge before the policy-maker/s is to create opportunities for income and jobs.
Eradicating poverty is not as simplistic as it might appear. It would be too naive to think and equate the fight against poverty to a military action, a surgical strike, a term that has become so common in the political parlance of today.
Further, any attempt to do away with the present food safety networks, agriculture subsidy and subsidised public utility services can have significant implications with more poverty, hunger and malnutrition. Often people who may not figure in the official statistics as poor can also lose jobs, income opportunities and their livelihood. Public distribution system that operates through the network of “ration shops”, which are there across the country, often save people, who do not figure in statistics as poor, in difficult times with the opportunity to buy food at affordable rates.
The route to ending poverty is so important. It should not lead to taking out a few percentage of the active workforce from the labour market. It is important to look at aspects such as probable response of beneficiaries and their motivation to work. Those who work in agriculture as manual labour, those working in the highly labour intensive traditional sectors of the economy like textiles, handicrafts, pottery, fish processing, coir industry all can impact negatively if labour gets scarce and wages go up. Can we do away with small enterprises, farmers, agricultural workers, industrial workforce, housemaids and all others in the informal economy? Since human beings have an inherent need to be active so they engage themselves in some activities. If money comes to them without any productive contribution, human engagement need not contribute to productive ventures. The suggested idea can have serious ramifications on small businesses, micro & small manufacturing jobs and informal economy as this could alter the existing labour market equilibrium in a significant manner. Small scale manufacturing, which is already in deep trouble due to low productivity and higher wages, can collapse.
When labour cost goes up, small enterprises will learn that it is uneconomic to continue in business. Imported products will flood and kill Indian Small and Micro Enterprises (SMEs). Export units that make labour intensive traditional goods like handicrafts and other such products will become more expensive to produce and they will lose out to competitors. As happened in the early employment guarantee scheme days (NREGA & MGNREGA), the new proposal by the Congress party, if they go ahead and implement in the event they get elected, could kill MSMEs, agriculture sector and farming activities and take India backwards. It will work through impacting labour market equilibrium.
Creating opportunities that engage people in productive ventures should be at the centre of any sensible policy initiative against poverty. A scheme that could kill the incentive to work along with India’s small entrepreneurs, entrepreneurship culture, agriculture and existing income generating activities and the economy as a whole is not at all a wise thing to do.
(The writer is Sr. Economist, Institute for Enterprise Research and Development. He specializes and writes on issues related to economy and politics. He can be reached at firstname.lastname@example.org)(Published on 15th April 2019, Volume XXXI, Issue 16)