• Recently Congress party has announced a minimum basic income guarantee scheme, which envisages providing Rs 72,000 annually to the 20% most poor of the country’s families.

Universal Basic Income and Minimum Income:

• A minimum guaranteed income scheme is one where a set of the population — in this case the poorest 20% — get an assured amount in their bank accounts, which could help them meet their basic needs. Such schemes can be unconditional, meaning that the beneficiary is free to spend the cash without any strings attached, but that is not yet clear in the one announced by the Congress.
• The income support scheme is being spoken of in the same breath as a universal basic income (UBI) scheme, an idea that is gaining popularity in many parts of the world. At best, the kind of income support schemes proposed, such as the one by the Congress in India Wednesday, is a quasi-UBI. That is because a UBI by its very definition reaches out to all citizens of a country or territory, irrespective of income levels.

Analysis:

• This scheme primarily will address the issue of income inequality or poverty. These are the best form of social justice for those left behind in an economy, as they offer a safety net to the poor against shocks such as income fluctuations, lack of employment and health issues.
• Additionally, the scheme comes with the promise of easing the burden on the government, which implements multiple social welfare schemes that have not quite helped in reducing poverty.
• But this is feasible only when other subsidies are eliminated. Politically, that is not easy as India’s experience in cutting subsidies for fertiliser or fuel has shown.
• There is also the challenge of identifying the beneficiaries, targeting, leakages or misallocation. The Tendulkar Committee identified 269 million as below the poverty line, or 21.9% of the population in 2011. The committee headed by C Rangarajan estimated this at 363 million. There has been debate as to how much of a decline there has been in these numbers since then. There is concern about whether the government has the capacity to implement these programmes. Economists also cite the issue of “moral hazard” — assured income leading to reduced incentives to work, or failure to build or create durable assets. Such criticism had been directed at MNREGA, introduced by the previous government.
• In many ways, these guaranteed income schemes are an implicit recognition that generating jobs is becoming progressively difficult. India too is finding it difficult, given its resource constraints and with private investments yet to revive. Such schemes can be financed either by fresh taxes, which is virtually impossible, or by raising resources — by monetising assets such as land, selling state—owned firms, eliminating major subsidies, or withdrawing tax giveaways.