08/05/2020 - Government Policies

KEY POINTS

Various ways for the sustenance of the poor

·         Direct Benefit transfer can strengthen the minimum living sustenance income guarantee, announced in the initial fiscal Covid policy response. It is indeed significant to combine food security with basic income. National Food Security Act, 2013 makes the right to food a justiciable right.

·         DBT can leverage the JAM and IT technology, and transfer benefits in a timely, cashless, leak-proof, and targeted manner. We can deal with sustenance issues without distorting market prices.

·         Disaster Support Schemes need to be designed to support the needy during this period. The beneficiaries could be state/region-specific, or whatever the deserving category as declared by the government. A good example can be the migrants or other deserving poor unable to work owing to the lockdown.

·         Strengthen social insurance payments for sickness, including provisions for PPE during Covid. The significant issues would be to firm up social security based on contributions. The monetary policy has limitations in triggering the economy through credit policy instruments.

·         Design appropriate conditional cash transfers, contingent upon citizens fulfilling certain government-targeted social goals such as vaccinations for children, or volunteering during emergencies.

·         Strengthen “Payment for Work” programmes, like MGNREGA. When the environment is more conducive, the government can roll out work programmes. In the post-Covid era, the government acting as “employer of last resort” is very relevant.

·         “Nudge Payments”, which make it more likely for an individual/family to make benevolent choices or behave in a particular way. An example is rewarding people to follow health guidelines.

·         It is vital to strengthen the existing fiscal package, by tweaking existing “means-tested policies” with a more effective exercise of morally required equity.

Recently, the FM announced a fiscal relief package of Rs 1.7 lakh crore to help the poor. This package—at 1% of GDP—is, at best, a teaser.  

It is high time to scale up the fiscal relief measures, with a special emphasis on “Basic Income”. For this purpose, the threshold fiscal deficit to GDP ratio, as in the FRBM, may be revised, we must emphasise the increased monetisation of deficits, along with the bond financing, rather than external financing of debt.

>>> The government can scale up the existing fiscal relief package and contribute to individual and household income sustenance in six ways :

- One, it can strengthen the minimum living sustenance income guarantee, announced in the initial fiscal Covid policy response. It is indeed significant to combine food security with basic income. 

- Two, “Calamity Jane” Disaster Support Schemes need to be designed to support the needy during this period.

- Three, strengthen social insurance payments for sickness, including provisions for PPE during Covid.

- Four, design appropriate conditional cash transfers, contingent upon citizens fulfilling certain government-targeted social goals such as vaccinations for children, or volunteering during emergencies. 

- Five, strengthen “Payment for Work” programmes, like MGNREGA.

- Six, design “Nudge Payments”, which make it more likely for an individual/family to make benevolent choices or behave in a particular way.

>>> Conclusion :

It is vital to strengthen the existing fiscal package, by tweaking existing “means-tested policies” with a more effective exercise of morally required equity. It would be a promise of equity, not equality, a new starting line set above the poverty line. More importantly, it will not be an ad hoc one.