The Cheat Sheet

Income guarantee scheme, and the poverty of ideas

Venky Vembu | Updated on January 31, 2019

The one that Rahul Gandhi promised the other day?

The same. He has said that the Congress will, if voted to power in this year’s general election, guarantee a certain minimum income to the poorest households in India.

Sounds like a winner.

The headline announcement has certainly created a buzz, and appears to have unnerved the BJP, which is now expected to come up with a more dramatic welfarist announcement in the upcoming Budget.

What will the guaranteed income be, and who will qualify?

Those details haven’t yet been announced. The Congress’ data geek, Praveen Chakravarty, has said the details will be fleshed out in the party manifesto, but has categorically said that it is not a Universal Basic Income (UBI) scheme and has hinted that it will be a progressive welfare measure.

What does ‘progressive welfare measure’ mean?

It means that poor households will get a cash transfer to the extent that the household income is lower than the threshold that marks them as poor. Illustratively, if a household income of ₹18,000 a year is set as the cut-off, a household that now earns only ₹10,000 a year will get ₹8,000 under the minimum income guarantee scheme; one that now earns ₹16,000 a year will get only ₹2,000 under the scheme and so on.

Sounds like a very complex scheme.

A few other welfare schemes implemented by the Centre, such as the Antyodaya Anna Yojana food subsidy scheme, have done a decent job of conducting grassroots-level surveys to identify the “poorest of the poor”. But in the minimum income guarantee scheme, there is another level of complexity in determining the amount of cash benefits that each identified household will qualify for.

Would a UBI have been better?

It would probably have been easier to implement, but would have come with a bigger financial tab — even if the top two income deciles are excluded. Remember, however, that developed economies have experimented with UBI, but have not been persuaded of its efficacy. Even Arvind Subramanian, who commended the UBI when he was Chief Economic Adviser and wrote a whole chapter on it in Economy Survey 2016-17, appears to have retraced his steps, and is now pitching for a ‘Quasi-Universal Basic Rural Income’ (QUBRI).

But overall a minimum income guarantee is a good thing, right?

It is difficult to begrudge a welfare measure targeted at the poorest people in a country that even to this day offers subsidies to the middle-class and the rich — on everything from cooking gas to power to gold to aviation turbine fuel to the tax breaks on small savings instruments (which are a form of implicit subsidy) — to the tune of ₹1 lakh crore a year.

Why then do you speak of a ‘poverty of ideas’?

There is nothing new about Rahul Gandhi’s claim to wanting to wipe out poverty. His grandmother, Indira Gandhi, coined the ‘garibi hatao’ slogan, and others too have made lofty promises over the years. Yet, without exception, every party believes in throwing good money after bad in pursuit of votes ostensibly in the cause of alleviating poverty. But both the UBI and the ‘minimum income guarantee’ scheme are premised on subsuming other subsidies. Rolling back such entrenchments requires political courage — and there’s a deficit of that in virtually every party. So, forgive me for sounding cynical.

A weekly column that helps you ask the right questions.

Published on January 30, 2019

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