Poverty & Inequality

NYAY e-Symposium: Prioritise expansion of National Social Assistance Programme

  • Blog Post Date 03 May, 2019
  • Perspectives
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Pronab Sen

Chair, Standing Committee on Statistics


Dr Pronab Sen (Country Director, IGC India) argues that the first priority should be to expand existing social security, which covers the elderly, the handicapped, and widows – given the fact that much of poverty is due to high dependency ratios. More importantly, this would be much less divisive than how NYAY is currently being envisaged.


Can you explain why NYAY is necessary when we already have so many other poverty alleviation schemes? Why should we not just increase the budget for the existing schemes?

With apologies to Bill Clinton, “It’s the elections, stupid!” Increasing allocations to existing schemes simply does not have the same traction as a ‘Big Bang’ announcement; and you certainly cannot have a catchy acronym. 

On a more serious note, the two main anti-poverty programmes – PDS (public distribution system) and MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) – do not actually require very much more funds; the problems are more administrative in nature. 

Other than these two, the coverage of existing social security schemes, mainly the NSAP (National Social Assistance Programme), which covers the elderly, the handicapped, and widows, is woefully poor and the quantum of support is risible. Substantial expansion in coverage and quantum is both necessary and desirable. This really should take first priority. Although this would not appear to be ‘a final assault on poverty’, a compelling case could be made on the basis of the fact that much of poverty is due to high dependency ratios. More importantly, this would be much less divisive since these categories of persons are – to use an archaic and much reviled term – seen to be the ‘deserving poor’. 

Do you think that the money would be better utilised if instead it is used to improve the existing public education and health services? Or, have we simply given up on trying to make public education and health delivery functional? 

The two are not mutually exclusive. Health and education are both in the nature of investments, and consequently show results after a lag. In the meantime, it is necessary to protect the poor and the vulnerable. Social security is meant to do precisely this. 

Would you prefer an alternate scheme that distributed the same amount of money through cash transfers over a larger number of households by reducing the amount to each recipient?  If yes, why?

If that is the choice, then yes. A sum as large as Rs. 6,000 per month will completely alter the economic status of various strata of society. The bottom 20% will leap-frog the 30 to 40% who were above them earlier. This will almost certainly lead to resentment, and possibly to social disruption. 

Do you have any concerns about the fiscal burden of this extra expenditure? Do you think that the existing tax rates would have to be changed or the existing subsidies eliminated to accommodate NYAY? 

The fiscal feasibility is certainly an issue, but it is not insurmountable. Taxes will certainly have to be raised, but not necessarily through higher rates. Removal and/or rationalisation of exemptions and deductions can take care of a substantial part. Some subsidies too can be cut. However, care has to be taken in assessing the impact of these changes since in practically all cases there will be changes in the effective relative prices and incentives. 

What would you say to people who are worried that an infusion of cash would increase demand but not the supply and cause a price rise? 

Cash infusion is in and of itself desirable under the present situation. India has a very large cash economy, which is at present suffering from a very serious shortage of liquidity. Correcting this problem is of the highest importance to revive the informal sector, including agriculture, and thereby the creation of work opportunities. Having said that, excess liquidity too is not a good thing for obvious reasons. Therefore, calibrated transfer of cash should be the policy objective. The problem with NYAY is that it involves a very large cash infusion with practically no possibility of rolling it back if circumstances so require. 

Which of the existing subsidies from the central government are dispensable and substantial enough to be considered for elimination? 

It is not possible to state that any subsidy is dispensable per se. Each has to be evaluated on its merits and the extent to which its need is obviated by the income transfer scheme. 

Targeting the bottom 20% seems to be a herculean task. Which data can the governments use to identify the bottom 20%? What sort of targeting mechanism would you suggest? 

There is no such data, and I do not believe that it can be generated with any degree of accuracy. The likelihood is that something similar to the SECC (Socio Economic and Caste Census) will be used, which measures correlates of poverty and not poverty itself. There is a degree of subjectivity in this procedure which cannot be wished away. 

The proposed scheme is bound to generate perverse incentives for a significant part of the population. They would try to show that they are a lot poorer than they are or even to lower their incomes in order to qualify. How would you construct the scheme to minimise the damage from this obvious problem? 

The focus will have to be on characteristics which are objectively verifiable and popularly accepted as indicators of poverty and deprivation. Such variables are culture-sensitive and may not be the same across the country. This creates its own set of problems as far a regional equity is concerned. 

How would you ensure that this scheme does not turn out to be a Trojan horse to weaken or destroy the existing schemes like NFSA and NREGS? 

One option would be to bring everybody holding a BPL (below poverty line) ration card under the ambit of the scheme. This will involve a reduction in the per family pay out, but has the advantage that PDS can be moved to a single price scheme. MNREGA should be strengthened in any case, since the additional cost is unlikely to be large. 

The deficiencies in the existing poverty alleviation schemes stems from weak State capacity. Will NYAY also not be hampered by the same? 


This post is part of I4I’s e-symposium on NYAY: https://www.ideasforindia.in/topics/poverty-inequality/decoding-congress-nyay.html   

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