Why socialism fails? NYAY

Our maid – Sarala – works at about 4 homes. She works close to 6 hours a day. With this hard work she earns more than INR 15,000 per month. There are laborers who work at construction sites and as daily wage electrician or carpenter – Kishore – in our area. Assume laborer earns INR 250 per day that comes out to be more than INR 6,000 per month. I am giving these numbers for Mumbai’s unskilled workers. So, I did some back of the envelop calculations. Here are some questions that make us believe Why socialism fails?

Now let’s review a probable scheme NYAY announced few days back. NYAY is promised by Congress party (erstwhile Congress (Indira)). In this scheme they intend to offer 6,000 per month to the bottom 20% poorest people of India.

Many of the people identified in the beginning, will fall in that category. Why? Because there is no way you can define bottom 20% poorest people. The reason is none of the above are in tax bracket. There is no way you can define their being “poor”. You may argue that there is a Below Poverty Line (BPL) cards. Many of the Indians know that our systems are such that this card – like a Bangladeshi illegal immigrant can get an Aadhar – is easy to get. If you do not remember any such card being made, read here. At the same time, if without such verification a scheme is run – you would get to see a misuse like this. Both the points are seemingly contradictory, however this is how manipulation happens with Government schemes. Most of the money allocated goes to the corrupt party’s politician’s pockets.

This corruption is just one part of the story. Let’s dig a bit on how it can impact country’s economy. Now, since Sarala and Kishore are immigrants from different parts of India either they can get the benefits in their respective villages or the worst migrate back to the village – because they can get 6,000 for free per month. A village may not be as expensive so survival can be easy there. If they get the benefits staying here the NYAY scheme becomes UNNYAY (injustice) in itself. If they migration and so possibly many others. The shortages of unskilled labor in cities certainly will result in expensive labor. This expensive labor will translate in expensive stuff – be it real estate (the industry is in a tight spot anyway) or a house maids.

Assuming some numbers and bringing others numbers, I did some back of the envelop calculations, references are attached herewith. Click on the images to enlarge.

The worst is yet to come – one of the Congress’s think tanks Sam Pitroda says we will have to increase tax on income to manage in this expensive scheme. The outlay of NYAY can be as much as 22% of GDP. The numbers are calculated based on population estimates of 2017 and GDP estimates of 2017. Please check screenshots. This scheme would most likely cross defense budget of India. Effectively, it will reduce savings of middle class due to tax burden and higher inflation.

I will leave you with few questions on this scheme – why would Sarala or Kishore want to up skill him/herself and ADD to the economy if such free money is available to him/her? Would not there be a competition to show oneself poorer than the poorest to get this free money? Should not job creation and up skilling be the priority of government rather than splurging tax money? Just imagine if up skilling program gets such fund (3.8 trillion or 3.8 lakh crores INR) how much skilled labor we can create? How successful is MGNREGA? If it really was, we must have had pukka roads across country by now. If a report writes positively about the scheme – can it possibly be PAID for?

And the last question to you – if you were Sarala or Kishore what would you prefer – free money or a dignified earning, up skilling and job opportunity? If your answer is former – read individually smart collectively dumb.

Note: numbers of 2017 are taken as those were readily available on Google Search