04/07/2020 - Indian Economy

KEY POINTS

·         There has been considerable discussion on universal basic income (UBI) in recent years. It is true that a universal scheme is easy to implement. The problem with non-universal targeted programmes is the problem of identification.

·         In order to avoid the identification problem, we have three proposals which meet the objective of providing a minimum basic income to the poor and vulnerable groups in both rural and urban areas.

·         These are: One, give cash transfers to all women above the age of 20 years; two, expand the number of days provided under MGNREGA and three, have a national employment guarantee scheme in urban areas.

·         On the proposal of cash transfers, one way of doing it will be to give it to all women say above the age of 20. This is an easily identifiable criterion because the Aadhaar cards carry the age of the person.

·         The second and third approaches are expanding MGNREGA in rural areas and introducing an employment guarantee programme in urban areas respectively.

·         At present, MGNREGA is availed of only for 50 days of employment, although the Act guarantees 100 days of employment. The first is to increase the number of days under the scheme from 100 to 150 in rural areas. The second is to introduce an Employment Guarantee Act in urban areas and provide employment for 150 days.

·         Apart from expanding rural MGNREGA, we are proposing a nation-wide urban employment guarantee scheme to improve livelihoods. The design can be slightly different from MGNREGA. In urban areas, employment can be provided to both unskilled and semi-skilled workers as there is demand for the latter workers also.

·         To conclude, in the post-COVID-19 situation, we need to institute schemes to provide a minimum income for the poor and vulnerable groups.

·         For this purpose, we propose here cash transfers for women, increasing MGNREGA from the present 100 days of work to 150 days in rural areas and the introduction of 150 days of work as an urban employment guarantee scheme.

·         This will cost around 2 per cent of GDP and will help the poor, informal workers, including the migrant workers, significantly reducing poverty.

The economic impact of the coronavirus disease is expected to be huge and catastrophic. Already before the crisis, the demand for "Universal basic income" were on rise. What the Covid-19 crisis has done is to highlight the issue of providing "Basic minimum income(BMI)" to the poor in the post covid India.

BMI is a "targeted plan of providing an income floor to the poor rural and urban households"- who are disproportionally impacted because of this corona crisis.

>>> Various possible ways to provide BMI for the weak and vulnerable section :

- "Direct cash transfers to all women above the age of 20 years", with the identifiable criterion of Aadhar card, provided- everyone receiving cash transfer must declare that her total monthly income is less than Rs 6,000 per month. 

- "Expand the number of days provided under MGNREGA" :  In order to provide income support to the poor and informal workers, the number of days under the scheme from 100 to 150 in rural areas needs to be increased. 

- Introduce "National employment guarantee scheme in urban areas" and provide employment to both unskilled and semi-skilled workers for 150 days.

- On an average, the above three proposals will cost around 2 per cent of GDP, considering - the female population above the age of 20 is around 42.89 crore, there are 5.48 crore households in rural areas and 2.66 crore households in urban areas.

>>> Loopholes in BMI support:

- It is not clear, whether proposed BMI support will cover 22 per cent of the population as poor (as fixed by Tendulkar committee) or 29.5 per cent (fixed by Rangarajan committee). Both these committees studied poverty in India.

- Although, the identifiable criterion- the Aadhaar cards carry the age of the person, but it could also lead to exclusion of many people due to self-reported errors like - mismatch in name, age.

>>> Conclusion :

BMI is a 'demand-based programme', thus, it will solve the 'demand side problem' by transferring the money into the accounts of the beneficiaries so that they can buy the goods and services of their requirement and choice, which will significanntly reduce poverty.

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