Whether the Congress president Rahul Gandhi has ‘stolen the thunder’ from the ruling party by promising a minimum income for all if voted to power, is a matter of conjecture. However, in principle, it is — like the idea of an ‘universal basic income’ mooted by former chief economic advisor Arvind Subramanian in Economic Survey 2016-17 — not without merit. It differs from the UBI by not being universal in nature; rather, it seems aimed at providing a minimum income to those below that level. There is as yet no clarity on how the individuals concerned will be identified, or how or what sums will be transferred to them. Perhaps, the Socio-Economic and Caste Census will come into play. That said, the economic principles underlying the UBI and the Congress’ version are not dissimilar. As the Survey 2016-17 explains: “It opens up the possibility of flexibility in labour markets. It promotes equality by reducing poverty. It promotes efficiency by reducing waste in government transfers. And it could, under some circumstances, even promote greater productivity.” The Survey contests the criticism that a ‘dole’ kills any incentive to work, arguing that at minimum levels it is unlikely to do so. In a demand constrained rural economy, it will boost productive forces.
Labour reforms will remain a non-starter if a job is to remain the sole source of social security. It is just as well that the Modi government has unveiled Ayushman Bharat as a net against unforeseen health expenses. Along with income support schemes such as Telangana’s Rythu Bandhu for landed farmers, and MGNREGA for the poorer sections, it would seem that India is evolving a sui generis social security model — which includes a broad income support programme. This would bolster industrial growth and productivity, more so if education and skills of the workforce improve.
The question is to find the funds for this new paradigm of welfarism. Rather than focus on raising tax rates, the axe should fall on a plethora of unwanted subsidies. Even if one assumes that an income transfer programme were to cost, say, 4 per cent of the GDP, this can be realised by pruning “implicit subsidies” availed by the middle class, identified by the Survey. These include concessions on LPG (already being pared), railway tickets, aviation fuel, personal income tax exemptions and gold. While a targeted scheme is likely to give rise to inclusion errors, these may be less than the cost of covering the whole population. However, leakages arising out of targeting can be huge in backward regions where the bureaucracy is corrupt and the people lack social agency. An income support programme should be tailored to regional specifics. The debate on whether conditional cash transfers, such as the Bolsa Familia programme in Brazil which links transfers to families sending children to school, yields better results than a non-conditional transfer has not been resolved. Finally, inclusive growth cannot remain a slogan; it is essential for growth with stability.