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Guaranteeing minimum income – The Hindu BusinessLine


Life has come full circle in two years. When Arvind Subramanian, former chief Economic adviser, set off discussions on universal basic income through a recommendation in Economic Survey 2016-17, Finance Minister Arun Jaitley ruled out its rollout. Jaitley said it was not politically feasible as it would have meant either withdrawing some welfare schemes or increasing public spending. Now with general elections about two months away and many sections facing an economic crisis, political parties see the promise of income transfers as means to ease distress and gain votes.

Congress president Rahul Gandhi has already announced that if his party were to come to power, it will guarantee a minimum income to every poor person in the country. The BJP-led NDA government may take the plunge into some form of income transfer. The idea of income transfer is not new, but unconditional and universal schemes are not fully tested. A pilot study conducted in Madhya Pradesh by the NGO, Self Employed Women’s Association of India, with Unicef in 2012-13 showed that even a small monthly transfer of ₹300 per adult and ₹150 per child can have a transformative effect.

No income transfer scheme in India can be truly universal, where every citizen would be entitled to receive money. But it can be universal within a target group — the challenge would be identifying the group.

Another challenge would be to decide on the right sum to be transferred without any condition — providing income security, without being so large as to disincentivise individuals from engaging in economic activity.

Also, the primary and secondary purpose of income transfer need to be established — be it consumption, or acquisition of income generation assets — as that would determine the frequency of the transfer. To develop a good scheme, several pilot studies are needed with different groups, with varying sums and frequencies of transfers. Beneficiary behaviour needs to be understood.

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Guaranteeing minimum income – The Hindu BusinessLine


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