THE GIST of Editorial for UPSC Exams : 02 MARCH 2019 (Ensure a minimum income for all (The Hindu)

Ensure a minimum income for all (The Hindu)

Mains Paper 1: Economy
Prelims level: Income transfer scheme
Mains level: Discuss the income transfer scheme and its implication

Context

•  An UBI requires the government to pay every citizen a fixed amount of money on a regular basis and without any conditionalities.
•  Demand for an UBI is that millions of people remain unemployed and are extremely poor, despite rapid economic growth in the last three decades.
•  The National Democratic Alliance government has already unfolded a limited version of the UBI in the form of the Pradhanmantri Kisan Samman Nidhi Yojana (PM-KISAN) which promises ₹6,000 per annum to farmers who own less than 2 hectares of land.
•  Going by media reports, the election manifesto of the Congress Party may announce an even more ambitious version of the scheme.

Where it will work

•  The UBI is neither an antidote to the vagaries of market forces nor a substitute for basic public services, especially health and education.
•  Besides, there is no need to transfer money to middle- and high-income earners as well as large landowners.
•  However, there is a strong case for direct income transfers to some groups: landless labourers, agricultural workers and marginal farmers who suffer from multi-dimensional poverty.
•  These groups have not benefited from economic growth. They were and still are the poorest Indians. Various welfare schemes have also failed to bring them out of penury.
•  According to National Sample Survey Office (NSSO) data from the 70th round, institutional credits account for less than 15% of the total borrowing by landless agricultural workers; the figure for marginal and small farmers is only 30%.
•  These groups have to borrow from moneylenders and adhatiyas at exorbitant interest rates ranging from 24 to 60%.
•  An income support of, say, ₹15,000 per annum can be a good supplement to their livelihoods an amount worth more than a third of the average consumption of the poorest 25% households, and more than a fourth of the annual income of marginal farmers.

Better productivity

•  Income transfers to the poor will lead to improved health and educational outcomes, which in turn would lead to a more productive workforce.
•  Women tend to spend more of their income on health and the education of children.
•  The effect of an income transfer scheme on unemployment is a moot point. In principle, cash transfers can result in withdrawal of beneficiaries from the labour force.
•  However, the income support suggested above is not too large to discourage beneficiaries from seeking work. In fact, it can promote employment and economic activities.
•  Income receipts can come in handy as interest-free working capital for several categories of beneficiaries (fruit and vegetable vendors and small artisans), thereby promoting their business and employment in the process.

Three immediate benefits

•  It will help bring a large number of households out of the poverty trap or prevent them from falling into it in the event of exigencies such as illness.
•  It will reduce income inequalities. Three,
•  Since the poor spend most of their income, a boost in their income will increase demand and promote economic activities in rural areas.

Other benefits

•  An income transfer scheme cannot be a substitute for universal basic services.
•  The direct income support to the poor will deliver the benefits mentioned only if it comes on top of public services such as primary health and education.
•  This means that direct transfers should not be at the expense of public services for primary health and education. If anything, budgetary allocation for these services should be raised significantly.
•  Programmes such as the Mahatma Gandhi Rural Employment Guarantee Scheme should also stay.
•  With direct income support, the demand for the programmes will come down naturally.
•  However, in the interim, it will serve to screen the poorest in the country and give them a crucial safety net.

Using datasets

•  The Socio-Economic and Caste Census (SECC) 2011 can be used to identify the neediest.
•  Groups suffering from multidimensional poverty such as the destitute, the shelter-less, manual scavengers, tribal groups, and former bonded labourers are automatically included.
•  The dataset includes more than six crore landless labourers. It also includes many small farmers who face deprivation criteria such as families without any bread-earning adult member, and those without a pucca house.
•  The other needy group, small farmers, missing from the SECC can be identified using the dataset from the Agriculture Census of 2015-16.
•  These two datasets can help identify the poorest Indians, especially in rural India. However, many households such as marginal farmers belong to both datasets.
•  The Aadhaar identity can be used to rule out duplications and update the list of eligible households.

Way forward

•  As an approximation, the number of eligible households is 10 crore. That is, even in its basic form, the scheme will require approximately ₹1.5 lakh crore per annum.
•  The PM-KISAN Yojana can be aligned to meet a part of the cost. Moreover, the tax kitty can be expanded by reintroducing wealth tax.
•  Nonetheless, the required amount is beyond the Centre’s fiscal capacity at the moment.
•  Therefore, the cost will have to be shared by States. States such as Telangana and Odisha are already providing direct income support to their farmers.
•  These States can extend their schemes to include the ‘non-farmer poor’. The other States too should join in.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1) Consider the following statements:
1. The Archaeological Survey of India (ASI) was set up in 1861.
2. Its headquarters is situated in Kolkata.

Which of the statements given above is/are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer: A

Mains Questions:
Q.1) A basic income scheme will deliver benefits to the poor only if it comes on top of public services. Comment.