Congress’ Mahalakshmi cash transfer scheme could cost between Rs 2 lakh crore and Rs 5 lakh crore
Congress’ Mahalakshmi cash transfer scheme could cost between Rs 2 lakh crore and Rs 5 lakh crore
The Congress party’s manifesto has promised an ambitious cash transfer of Rs 1 lakh per ‘poor’ family if voted to power in the ongoing Lok Sabha elections. The transfer will go to the oldest woman of the house or the oldest member. The scheme could cost anything between Rs 2 lakh crore to Rs 5 lakh crore, according to some back-of-the-envelope calculations.
The Congress party in its manifesto has announced a ‘Mahalakshmi scheme’ to provide Rs 1 lakh per year to every poor Indian family as an unconditional cash transfer.
The poor will be identified among the families at the bottom of the income pyramid. The amount will be directly transferred to the bank account of the oldest woman of the household. In families where there is no such woman, the amount will be transferred to the account of the oldest member of the family, according to the party.
The party says that if voted to power the scheme will be rolled out in stages and reviewed every year to assess the number of beneficiary families and its impact on alleviating poverty.
Fiscal math
According to the 2011 Socio Economic and Caste Census, there are 24.49 crore (243.9 million) households in India, of which 17.97 crore live in villages. Of these, 10.74 crore households are considered as deprived. Of these 2.38 crore (13.28 percent) households have one or less room, kuccha walls and kuccha roof, 65.33 lakh households (3.64 percent) have no adult member between the age 16 and 59, 69.43 lakh (3.86 percent) are female headed households with no adult male member between 16 and 59 and 7.20 lakh (0.40 percent) are households with differently abled member and no other able bodied adult member. According to the Census, of the deprived households 3.87 crore (21.56 percent) are SC/ST households, 4.22 crore (23.52 percent) are households with no literate adult above age 25 years and 5.40 crore (30.04 percent) are landless households deriving a major part of their income from manual labour.
If the Congress party decides to spread the Mahalakshmi scheme over five years, it will have to give Rs 1 lakh to at least 2.148 crore families in one year, this is according to the 2011 census data. The amount will vary depending on the number of ‘poor families’ identified.
A conservative estimate puts the government expenditure at Rs 2.1 lakh crore per annum on the scheme of giving unconditional cash transfers. This number could go up to Rs 5 lakh crore depending on the number of poor families.
For comparison, the annual budgets of big states like Andhra Pradesh, Assam, Punjab and Bihar are between Rs 2 lakh crore and Rs 3 lakh crore. India’s education budget for the year 2023-24 was Rs 1.12 lakh crore as opposed to Rs 1.04 lakh crore in 2022-23. India’s healthcare budget was Rs 79,221 crore in 2023-24.
One of the primary challenges will be the availability of sufficient funds to sustain the scheme. High financial burdens can strain government budgets, especially if the schemes are not adequately funded or if there are competing priorities for government spending.
Experts say government schemes with high financial burdens need to be financially sustainable in the long term. Ensuring that a scheme’s costs are manageable and do not lead to unsustainable fiscal deficits is crucial.
Administrative challenges
Complex administrative structures or inefficient implementation mechanisms can increase the cost of delivering any such scheme. Ensuring efficient delivery and minimising administrative overheads is essential to manage financial burdens effectively.
Identifying and targeting beneficiaries accurately is critical to prevent leakage and ensure that resources reach those who need them the most. Poor targeting can result in funds being wasted or misallocated, experts said.
Regular monitoring and evaluation are necessary to assess the effectiveness of any scheme and identify areas for improvement. Investing in robust monitoring and evaluation mechanisms can help optimise resource allocation and improve the scheme’s impact.
Sustaining high financial burdens for government schemes often requires strong political will and commitment. Changes in government priorities or leadership can impact the continuity and funding of such schemes, they said.
Economic downturns or unforeseen events can affect government revenues and increase pressure on public finances. Adapting to economic fluctuations while maintaining support for essential schemes can be challenging.
Public perception and support for a scheme can influence its funding and sustainability. Building and maintaining public trust through transparent communication and demonstrating a scheme’s benefits are crucial for its long-term success.
Addressing these challenges requires careful planning, effective governance, and continuous monitoring to ensure that government schemes with high financial burdens fulfil their intended objectives while remaining financially viable and sustainable.