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May 03, 2019

NYAY e-Symposium: The potential macroeconomic impact of NYAY

As part of I4I's e-symposium on NYAY, Research Director and Senior Fellow Niranjan Rajadhyaksha contends that the estimated cost of NYAY is substantial and there is ample reason to worry about the fiscal burden of the scheme.


"The estimated cost of NYAY is substantial – Rs. 3.6 trillion a year. It would be broadly six times what has been allocated to MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) in the interim budget presented in February 2019. It is also nearly 13% of total central government expenditure for the fiscal year 2020. It is hard to see how such a large incremental spending programme can be funded through cuts in other expenditure items alone, including non-merit subsidies. That will be a very difficult political economy call, given that non-merit subsidies mostly benefit vocal interest groups. There thus has to be either fiscal expansion or an increase in tax collections. The latter could – but need not – entail higher tax rates. India could be at an inflection point at which its tax-GDP (gross domestic product) ratio begins to grow rapidly, but that is a guess rather than a hard fact. In short, there is ample reason to worry about the fiscal burden of NYAY."


Read the interview transcript here.

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