New welfare paradigm

| Updated on March 31, 2019

The Congress’ basic income proposal hasn’t been thought through

The Congress’ tall promise of paying ₹72,000 a year into the bank accounts of about five crore families, or about 20 per cent of the poorest households if it comes to power, is at least on paper a socio-economic and fiscal game-changer. It goes further than the PM-Kisan scheme, which transfers ₹6,000 a year to poor farmers. Besides addressing poverty, it can ensure a basement-level demand in the economy. However, the proposal has thrown up some questions: whether it is fiscally feasible; how the beneficiaries will be identified; whether there is a moral hazard in giving cash without strings attached; and whether the scheme should become a substitute for existing welfare measures. A sum of ₹3.6 lakh crore (1.8 per cent of the GDP) cannot be raised except by reducing existing subsidies. Economic Survey 2016-17, mooting a ‘universal basic income’, has observed: “The Budget for 2016-17 indicates that there are about 950 central sector and centrally sponsored sub-schemes in India accounting for about 5 per cent of the GDP by budget allocation. A large majority of these are small in terms of allocation with the top 11 schemes accounting for about 50 percent of total budgetary allocation.” While the budget of some of these schemes can be subsumed into an income transfer plan, the benefits of programmes such as MGNREGS and even the PDS in some backward States such as Chhattisgarh cannot be brushed aside.

But the really troublesome issue relates to identifying the beneficiaries. Getting this wrong can drag people into the familiar morass of rent-seeking and confusion. The UBI has been mooted to get around this problem, but it implies a dissipation of the proceeds to the non-poor. The Socio-Economic and Caste Census will be of help here. However, some experts have suggested a way out: target the scheme as a pension for the elderly, widows and disabled persons as well as a universal maternity entitlement. These are readily identifiable categories. At present, the Centre pays a paltry old age pension of ₹200 a month; this can be raised to ₹1,000. The payout of social security pensions as well as a universal maternity entitlement of ₹6,000 per child (as under the National Food Security Act, which covers 66 per cent of the population) is estimated at ₹1.7 lakh crore — less than the Congress’ plan. At present, only the organised sector gets maternity benefit. As for the issue of whether a ‘dole’ will induce laziness, targeting of this nature restricts the payout to those who are out of work anyway, and need support. The working population can rely on schemes such as MGNREGA.

A well-implemented income support measure has much going for it, provided bank transfers are foolproof and women are the account holders. Broadly, a new welfare paradigm is taking shape against the backdrop of the general elections. It should combine effective outreach with fiscal prudence.

Published on March 31, 2019

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