Rahul Gandhi's income plan not viable without hiking taxes: Top economist

NEW DELHI: The economics of the NYAY scheme announced by Congress president Rahul Gandhi scheme is not viable without raising taxes, a top economist has said while backing the idea of replacing the string of centrally-sponsored schemes.

Earlier this month Gandhi had unveiled the Nyunatam Ayay Yojana (NYAY) scheme which assures upto Rs 72,000 per year or Rs 6,000 a month to 20 per cent of the country's poorest families. He has vowed to implement the scheme if the party is voted to power. "I think the arithmetic behind it has to be we have to find new fiscal resources.

I think it is something we have been saying for a while pretty loudly that we are under taxed given its ambition as a nation," Abhijit Banerjee, Ford Foundation International professor of economics at the Massachusetts Institute of Technology (MIT) told Times Now.

"The economy is not viable without increasing taxes. The NDA budgets are not viable without raising taxes. Nothing is viable without raising taxes. We haven't really confronted that especially given that we have stopped the inflation tax," said the MIT professor, who is widely believed to have advised the Congress party on the scheme.

Banerjee said the UPA "maybe for better or worse" was using the inflation tax heavily and as a result while there was high interest rates, the share of government debt in GDP was falling, mostly because of inflation.

"Now we are not using that, now we really have very few instruments to raise revenue. We are really hurting. This is a problem that has got worse over the last five years. Killing inflation might be a good thing but it is something that completely made us fiscally less sustainable," he said.

The noted economist was also of the view that the plethora of centrally-sponsored schemes and "extremely distortionary subsidies" need to be phased or replaced.