Rahul Gandhi in an interaction with students in New Delhi, on Feb. 23, 2019. (Photograph: PTI)

Dear Rahul, You’ve Done NYAY (Justice), Now Give UMMEED (Hope)

BloombergQuintOpinion

I absolutely endorse NYAY (Nyuntam Aay Yojana, or Minimum Income Plan), authored by Rahul Gandhi’s Congress as its big political idea for the 2019 polls.

No, I’ve not become a leftist. I continue to be a card-carrying right-of-centre economic liberal who believes in the power of well-regulated, competitive markets to transform lives. Because at the core of this ideology is a deep, efficient welfare state that is laser-focused on the genuinely poor and disenfranchised citizens. Look around – some of the richest free market economies also run the most powerful welfare programmes. There is no contradiction. Instead, there is organic chemistry between the two.
Dear Rahul, You’ve Done NYAY (Justice), Now Give UMMEED (Hope)

NYAY Sent PM Modi Into Panic Mode

Within hours, BJP political heavyweights were holding televised conferences and tweet storms to ridicule the idea. Gosh, how could the Congress outsmart Modi in coining a savvier acronym? But most of their barbs landed like dud missiles:

  • Predictably, Indira Gandhi and Pandit Nehru were the fall guys.

“Poverty would have vanished a long time back if Rahul’s great-grandfather had not grown our economy at the snail’s pace of 3.5 percent in the 1950s”, screamed one worthy, blithely ignoring the pitiable state inherited from the British, as opposed to the robust $2 trillion economy bequeathed to Modi.

Jawaharalal Nehru with Indira Gandhi. (Photograph: NMML/Government of India) 
Jawaharalal Nehru with Indira Gandhi. (Photograph: NMML/Government of India) 
  • After the invectives, came some real numbers.
Heck, what a white lie. This Rs 5.43 lakh crore includes my father’s pension, my driver’s LPG subsidy, his wife’s maternity entitlement, an Afghan student’s scholarship... it’s not a minimum income being transferred to the really poor.

Why, exactly like Modi’s foot soldiers will target the half a billion poor recipients of Ayushman Bharat (health insurance). If Modi-BJP can, so can Rahul-Congress, right?

  • Finally, “how will you finance it? By yanking the fiscal deficit back to 6 percent as you had done in 2008, throwing the economy into an inflationary spiral?”

But wait again. That 6 percent deficit was a calibrated stimulus to keep the economy afloat in the wake of the severe post-Lehman global recession. It wasn’t an arbitrary, wanton move.

Then-Prime Minister Manmohan Singh, with  P Chidambaram and Pranab Mukherjee, in New Delhi. (Photographer: Pankaj Nangia/Bloomberg)
Then-Prime Minister Manmohan Singh, with P Chidambaram and Pranab Mukherjee, in New Delhi. (Photographer: Pankaj Nangia/Bloomberg)

Also read: ‘NYAY Is The Smartest Thing The Congress Has Done So Far’, Says Prannoy Roy

But Seriously, How Can NYAY Be Funded?

While the Congress has yet to enumerate the blueprint, let me make an intelligent guess. This is just one iteration; several variants are possible:

  • To begin with, everything will not happen on Day One. First, a pilot will be launched, say in 10 percent of the districts, followed by a staggered rollout – exactly like MGNREGA was successfully implemented.
  • So if we assume that the rollout will be across 10 percent, 20 percent, 30 percent and 40 percent of the districts over years one through four, the cash needed would be Rs 36,000 crore, Rs 1,08,000 crore, Rs 2,16,000 crore, and Rs 3,60,000 crore respectively.
Dear Rahul, You’ve Done NYAY (Justice), Now Give UMMEED (Hope)
  • There are two existing schemes which can justifiably be tweaked to realign them with NYAY. The first one is the food subsidy programme, budgeted at Rs 1,84,000 crores, that covers 67 percent of the population. Since per capita incomes have risen substantially, its coverage can be reduced to 50 percent, thereby releasing almost Rs 50,000 crore for NYAY. Also, MGNREGA could guarantee 150 days per year, up from the current 100 days, of employment to a NYAY beneficiary, carving out an additional Rs 10,000-20,000 crore.
Just these two tweaks could take care of the first 18 months without adding a penny to the deficit.
  • There are estimates that a tiny 1-percent wealth tax on households with assets of more than Rs 2.50 crore (just 0.1 percent of India’s households) could raise over Rs 1 lakh crore – added to the above cash, we already have half the cost covered with no impact on the fiscal deficit.
  • And finally, economic growth could cover the rest. India’s GDP is expected to grow from Rs 2 lakh crore to Rs 3.50+ lakh crore over the next 4-5 years. Voila! Just that would garner the additional tax revenue required to fund NYAY, while keeping the fiscal deficit at prudent levels.

The Key Is Massive Deregulation To Kick-Start Rapid Economic Growth

And so I turn to the ultimate weft of my argument. Rahul Gandhi should also launch the final assault on India’s draconian-ly regulated economy to free the animal spirits of our people. That is the flip side of NYAY, to undertake massive governance reforms such that entrepreneurship and wealth creation flourish, heaving our economy over the double-digit growth threshold that has remained elusive.

Nearly 90 percent of our GDP is produced in private enterprises, but it is horribly strangled in red tape. It’s India’s awful curse that policies are made by civil servants who are deeply suspicious of market forces; who’ve lived in cradle-to-grave financial security; who cannot even begin to understand what Schumpeter’s “creative destruction” means in the real world, not in tutorials read at the Lal Bahadur Shastri Academy in Mussoorie.

If you think I am exaggerating our cruel policies, here are a few egregious examples that I can rattle off from the top of my head:

  1. Why don’t we allow corporate restructuring via contracts, which can be wrapped up in weeks; why do our entrepreneurs have to waste years in court, paying ridiculously high legal fees?
  2. Why do we have contradictory guidelines that force companies to violate one regulator or another? For example, SEBI guidelines may not allow founders to dilute, while RBI guidelines slap penalties if they don’t (for example, newly-listed banks like Bandhan)? Or SEBI guidelines may force an acquirer to go above 51 percent while FDI rules prohibit that (like airlines)?
  3. Why do we control entertainment tariffs while petrol is freely-priced?
  4. Why does a company first get court approval for a tax-neutral merger, but then get hit by a demand of Rs 5,000 crore in ‘dividend tax’ for the same transaction?
  5. Why don’t we allow our first generation founders to issue equity with superior voting rights to protect them against Chinese and American raiders? Why are we so restrictive about allowing foreign listings and financial instruments?
  6. Why do we need an ‘anti-profiteering authority’ to harass and force small businesses to pass GST benefits to consumers? Why don’t we trust competitive forces to achieve that?
  7. Which country in the world taxes capital as income? And calls itself an “angel”?

I can go on and on and on.

There will easily be a million examples of such excesses which tie both the arms of our small business owners and first-generation entrepreneurs behind their backs, making them helpless against petty inspectors, overseas predators, and big local sharks.

Also read: #BQDebates: Can Rahul Gandhi’s Plan Be A Game Changer For Startups?

From NYAY To UMMEED

If NYAY is to succeed, Rahul Gandhi and Congress must also vigorously design and implement ‘UMMEED’, namely ‘Unleash Mahatvakanksha (ambition) and Mojo via Exceptional and Energetic Deregulation’.

NYAY and UMMEED should be treated as identical twins, born to and nurtured by the same mother, that is, a caring, sensitive and proactive Indian state. Together, these shall transform India.

Raghav Bahl is the co-founder and chairman of Quintillion Media, including BloombergQuint. He is the author of two books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, and ‘Super Economies: America, India, China & The Future Of The World’.