Pradhan Mantri Kisan Samman Nidhi

What is the issue?

The 2019 budget announced the Pradhan Mantri Kisan Samman Nidhi, guaranteeing direct income support for farmers.
This has renewed the debate on the idea of a universal basic income (UBI).

What is the PM Kisan Samman Nidhi?

Vulnerable landholding farmer families, having cultivable land of up to 2 hectares, will be provided direct income support of Rs. 6,000 a year.
This is to help them meet farm input and other costs during the crop season.
The programme would be made effective retrospectively from December 1, 2018.
It would be fully funded by the Union Government. The interim Budget provides Rs. 75,000 crore for the present and the next year.

What is the UBI concept?

The idea of universal basic income (UBI) is essentially transferring some income to every citizen.
This is built on the twin principles of universality and a notion of minimum basic income to those living at the poverty line.
The principle of universality is at the core of it given the problems of targeting.
Although the idea of universal basic income (UBI) has been in discussion for decades, no country has implemented it.
While a proposal for UBI was rejected by a three-fourth majority in Switzerland, Finland which started a pilot has now discontinued it.
But even in Finland, the pilot was not a strict UBI but a social protection scheme aimed at only the unemployed.
There have been some pilots by NGOs in developing countries in Asia and Africa.
But they have varied in content of transfer and coverage with only few being fully universal.

What about targeted support?

The proposals in the Indian context have mostly been for a targeted income transfer scheme and not UBI.
Some form of income support to those who are unable to participate in labour market has been there in most countries in some form or other.
E.g. in India, the National Social Assistance Programme (NSAP) pensions for widows, elderly and the disabled

How does India's UBI proposal differ?

In developed countries, the UBI is supposed to supplement existing social security provisions.
So it would be over and above the universal provision of health, education and so on.
But in the Indian context, the arguments in favour of UBI are centred on the inefficiencies of existing social security interventions.
Essentially, UBI in India seeks to replace some of these interventions with direct cash transfers.

Why are cash transfers flawed?

The targeted cash transfer scheme envisions the role of the state to only providing cash income to the poor.
This approach seeks to absolve the state of its responsibility in providing basic services such as health, education, nutrition and livelihood.
Besides, it is unfair, as it seeks to create demand for services without supplying the services, leaving the poor to depend on private service providers.
Evidently, privatisation of basic services such as health and education leads to large scale exclusion of the poor and marginalised.
In any case, India is among the countries with lowest expenditure to GDP ratio as far as expenditure on health, education and so on are concerned.

How are in-kind transfers a better option?

Cash transfers are not encouraging in terms of leakages compared to other schemes of in-kind transfer such as the public distribution system (PDS).
A move towards universalisation and use of technology enabled Chhattisgarh and Tamil Nadu to reduce leakages in the PDS.
It shows that universalisation is the key to efficient delivery of services against targeting proposed by the cash transfer schemes.

Also, the cash transfer proposals claim that it would address everything from agrarian crisis, malnutrition, educational deficit to job crisis.
But again the PDS shows that in-kind transfers are twice as effective in increasing calorie intake compared to equivalent cash transfer.
Similarly, the crisis in agriculture is unlikely to be resolved by income transfers, where addressing pricing, procurement and other structural issues are essential.
Likewise, there are different reasons for persistence for some of the above problems which cash transfer may not wholly address.

What is to be done?

An appropriate way to address poverty is to enable the citizens to earn their living by providing jobs.
For those who are willing to work, schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme should be strengthened.
Nevertheless, cash transfers would be relevant for those who are unable to access the labour market or are marginalised due to other reasons.

Source: The Hindu