The Indian National Congress' minimum income support program could boost consumption in the country, but economists are highlighting concerns about such a policy's potential implementation hurdles.
India heads to the polls starting this week to elect members for the lower house of its Parliament. The outcome, to be announced in May, will determine if Narendra Modi can secure a second term as prime minister.
But economists have highlighted concerns about the implementation hurdles such a policy could face. Those include the challenges of identifying recipients for the program and setting up a means to fund it. Congress' president, Rahul Gandhi, recently said income tax would not be increased to implement the scheme, according to local media reports. In its election manifesto, Gandhi's party also outlined other social sector schemes including farm loan waivers and higher spending on education that the party says it would pursue if it wins the elections.
"I'm sure they're going to tap the for more dividends," she told CNBC. Last year, the RBI board decided to form an expert committee to look into how much the central bank should hold in its reserves amid New Delhi's push to access the surplus."If that committee comes out with a certain recommendation, I don't think Congress is going to shy away from taking that additional cash.
"This will … severely impair the capex cycle," she wrote in a recent note. Still, she added, a Congress government may need to offset existing subsidies and schemes to fund the program or consider imposing additional taxes — but there's"limited wiggle room" as direct and indirect tax collections this year have remained largely lackluster.
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