By Sumarbin Umdor
‘‘Many studies have shown the positive outcomes of cash transfers on poor households’ expenditure on food consumption and increased spending on health and education. TMC pledges, if implemented, will therefore be most beneficial to the people of Meghalaya.’’
The newly formed TMC party in Meghalaya has made 10 pledges promising to implement them if elected to power. Among these pledges, the promise of cash transfers to different section of the society – Rs 1000 monthly to women, unemployed youth, single mother, widows, PWD and senior citizens; Rs 1200 annually to the families of all school-going children registered in Government-run schools; Rs 10000 annual financial assistance to all farmers- stand out prominently. This is for the first time that a political party in Meghalaya has included cash transfers as part of its poll manifestoes with assurance to implement some of them within 100 days in office. Like Moses and his ten commandments, Dr. Mukul Sangma and his team are betting on these 10 pledges to deliver the people of Meghalaya out of the present socio-economic quagmire, and themselves from 5 years of political wilderness.
The TMC did make a similar promise in Goa’s state election held in 2021 when it announced Rs 5000 to each woman head of household, but it failed to make any mark in that state. Meghalaya though is a different case as many of the TMC candidates for the upcoming elections are prominent faces, with its foremost leader having occupied the Chief Minister’s chair for many years. While it is not surprising for political parties to make tall promises before an election, these pledges of cash transfers by the party are being taken seriously by the electorate given that more than 7 lakh individuals have registered for them. This has rattled the other political parties as they do not know how to counter this poll strategy of the TMC.
While the Union and other state governments have been implementing cash transfers to support vulnerable section of the society, the question that begs an answer is whether Meghalaya, a state with a weak revenue base and fragile financial conditions made worse by the two years Covid pandemic, can afford to implement TMC’s unconditional cash transfer schemes (UCTs) and what will be the overall impact on the finances of the state. Here, a distinction is to be made between conditional cash transfers (CCTs) and UCTs. The former are schemes where cash transfer to beneficiaries is conditional on specific actions such as sending children to school or making regular health visits. UCT, on the other hand, are transfers made to vulnerable groups based on predetermined eligibility criteria. The PM-Kisan scheme is an example of UCT which provides 6000 annually to over 12 crore farmers. States are also increasingly implementing UCT targeted mainly towards farmers but also covering other sectors such as education, social welfare, and transportation.
Coming back to the cash transfer schemes of the TMC, Meghalaya at a very least will require Rs 1500 crore to fulfil three main pledges of cash transfers in the financial year 2023-24 alone based on the following assumptions. The projected population of Meghalaya in 2023 is 33.5 lakh which translates to 6.20 lakh households (estimated at the same household size as in 2011). Even if 4 lakh households avail of the WE Card (assuming that women in 2.2 lakh households do not apply as they are employed/do not opt) an amount of Rs 480 crore will be needed in FY 2023-24 for this pledge alone. For the unemployment dole (MYE Card), Rs 600 crore would be needed even if only 50 percent of the 10 lakh youth in the targeted age group (31 percent of the projected population) avail the scheme assuming that the rest are either employed or are pursuing studies or do not opt as they come from well to do families. As far as the farmer households are concerned, even if 4 lakh of the 4.5 lakh farmer households opt for the scheme, an amount of Rs 400 crore would be needed to implement income support for this group. The total amount for just these three schemes could easily climb to Rs 2000 crore for FY 2023-24 if enrollment in these schemes exceed the above assumptions.
Rs 1500 crore may not be such a big amount for many of the states in India, but for Meghalaya it represents about 13 to 14 percent of the actual revenue receipt and expenditure, and around 60 percent of the own source revenue in FY 2020-21. Given our fragile state of finances, there is not much elbow room for the new government to meet these expenses from its revenue account which had a deficit of Rs 815 crore in FY 2020-21 (and a corresponding fiscal deficit of 7.8 percent). With the discontinuation of GST compensation in June 2022 that guaranteed 14 percent growth in state GST collection since 1997, states like Meghalaya will find it very difficult to maintain revenue level in post GST compensation period which may adversely affect overall revenue receipts. Moreover, even the very optimistic budget projection of a revenue surplus in the coming FY 2023-24 will be able to cover only about 40 percent of the amount required to meet the above cash transfer schemes.
There is also not much room for the state to reduce its revenue expenditure as almost 50 percent of it constitutes committed expenditure (salaries, pensions, and interest payments), which when added with Grants-in-aid (grants to deficits and non-deficit schools and colleges, NHM, others) constituted about 87 percent of the state’s revenue expenditure in FY 2020-21. The expenditure of the above items will only increase in coming years given the expansion of administrative machinery (new districts, filling up of vacant posts, provincialisation of schools/colleges, pay revision, etc).
Any attempt to meet the poll commitments through open market borrowings will be a disaster for the state as its present outstanding debt has steadily increased over the years standing at 41 percent of GSDP in FY 2020-21 (it was 33 percent in FY 2016-17). This percentage does not reflect the contingent liabilities of Rs 3000 crore comprising borrowings by the loss-making state power companies guaranteed by the state government. Given the situation of these power companies, the state government will have to continue financially supporting them in the coming years.
Many studies have shown the positive outcomes of cash transfers on poor households’ expenditure on food consumption and increased spending on health and education. TMC pledges, if implemented, will therefore be most beneficial to the people of Meghalaya. However, questions remain on how it intends to mobilise resources to fulfil these promises given the financial challenges facing the state. Even if the resources are available, issues such as whether CCTs would be more appropriate than a blanket cash distribution to targeted beneficiaries, or whether it would be much better to increase allocation to capital outlay (i.e., spending on economic and social infrastructure like roads, schools, hospitals, etc) that was just under Rs 1816 crore -or under 14 percent of total expenditure in FY 2020-21, need to be justified.
Even the electoral promise of 5 lakh new jobs in the next five years by the NPP needs further clarification for the electorate to consider them seriously. In which sectors will these new jobs be created? How do we define these jobs (formal -government/private or informal and casual/gig or permanent)? Again, how does the NPP intend to mobilise the financial resources (government and private investment) that will be needed to be invested in human and physical resources leading to increased economic activities and the intended job creation?
After all, whether it is cash transfers or new jobs these are not likely to fall like manna from heaven.
(The author teaches Economics at NEHU. Email: [email protected])