Can we lift the poor out of their poverty by paying them Rs 21 per day? The CEA and the FM think so

Finance Minister Arun Jaitley, for the first time, came upfront to share his views last Sunday on the hotly-debated topic of the Universal Basic Income (UBI) broached by the Chief Economic Adviser (CEA) Arvind Subramanian in the Economic Survey on 31 January this year.

While inaugurating a workshop on “Contemporary Themes in India’s Economic Development and the Economic Survey” at IIT-Delhi, Jaitley said: “I am fully supportive of his (Arvind Subramanian’s) idea of Universal Basic Income but realise the limitations of Indian politics.”

Jaitley went on to add: “This year, the survey has initiated a very important idea as to how do we subsidise … how do we substitute the entire set of subsidies … we want to replace it by a Universal Basic Income (to a defined section of poor) and that UBI expedites their pulling out of the present state of poverty that they live in.”

Then Jaitley spoke about the political problem he faces in implementing the UBI: “I have always expressed to him (Subramanian) the fear that once he moots ideas like the UBI, we will be landing in a situation where people will stand up in Parliament and demand continuation of the present subsidies and over and above that let’s have the UBI, something that the Budget will not be able to afford.”

AFP

AFP

The finance minister dealt with both the keys issues involving the UBI – its objective and the method of implementing it. The objective is very clear – to pull the poor ‘out of the present state of poverty that they live in.” And the best way to do it, as he says, is substitution of all existing subsidies by the Universal Basic Income as envisaged by the Chief Economic Adviser.

But then what does Arvind Subramanian’s UBI policy offer to the poor to pull them out of poverty? To his credit, Subramanian, the author of the Economic survey, clearly worked out the financial implications of opting for the UBI. He wrote: “Based on the 2011-12 distribution of poverty, it seems clear that going from a certain very low level of poverty to eliminating it will be prohibitingly high. So, a target poverty level of 0.45 percent is chosen. Then the 2011-12 consumption level is computed for the person who is at that threshold. The next calculation is the income needed to take her above Rs 893 per month, which is the poverty line in 2011-12. This comes to Rs 5,400 per year.”

So, in effect, what does a poor woman get from the UBI? As per the government’s own ludicrously low level of calculation of the poverty line, she needed almost Rs 900 a month to make a bare living but she was entitled to just the half, barely Rs 450 per month under the UBI. That too, as the government proposes, she would get this money only after all the existing benefits that she is currently receiving – through the subsidised public distribution system (PDS),  through the guaranteed employment opportunity schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREA) or through the Food Security Act etc – cease to exist.

The question is – whether the poor woman’s condition would improve or worsen after the introduction of the UBI? Is Rs 450 a month today enough for one to keep one’s heart and soul together?

The supporters of the idea of the UBI might turn around and say that the CEA has, taking the inflation factor into consideration, scaled up the amount to Rs 7,620 per year for 2016-17. That works out to less than Rs 650 per month (about Rs 21 per day). But then by the same token, the cost of living has also gone up correspondingly in the last five years.

The paltry sum of Rs 21 per day would still be a revolutionary gift if it would be given by a sensitive government as an add-on benefit to the poor. But the Economic survey proposal, which the finance minister fully endorses, has been quite candid in this regard. Consider this statement in the Economic Survey while mooting the idea of the UBI: “A number of implementation challenges lie ahead, especially the risk that the universal basic income would become an add-on to, rather than a replacement of current anti-poverty and social programmes.” The finance minister echoed the same sentiment in his lecture on Sunday.

But then consider just one of the many anti-poverty programmes that the UBI seeks to replace – MNREGA. The basic income provided by this employment guarantee act is Rs 17,000 per year, at the daily wage rate of Rs 170 for 100 days a year.

Leave out all other benefits the rural poor get, just focus on this one scheme. If the government is concerned about the leakages in the scheme and about the unproductive assets created in the name of employment and wants to substitute it with a scheme of direct cash transfer, then should it not transfer at least the same amount to every household as it is entitled today – Rs 17,000 a year, which is a little less than Rs 1,500 a month or Rs 50 a day?

And, remember, this is just one of the several benefits that the rural poor enjoy today. If the government wishes to abolish the plethora of existing cash and in-kind benefits and introduce a system of only cash transfer under a single umbrella (UBI), then the amount of cash transfer should be such that, at least it should preserve the level of existing benefits of the poor, if not give them a better deal.

The CEA’s proposal to give the poor less than Rs 650 per month is clearly a sleigh of hand to enable the government to reduce fiscal deficit at the cost of the poor. Isn’t it ridiculous that the same government which had proposed last year the basic wage of Rs 9,100 per month for the poor non-skilled workers is proposing the payment of just Rs 650 per month as the basic income for them?

And what a biting irony it is to say, as the CEA has been saying all along and the FM said on Sunday -- that the government pays a meagre Rs 21 per day as basic income to the poor and still expects them to be lifted out of poverty, as if by a miracle!

Even if the government goes by the basic parameters of poverty as set out in the Tendulkar committee report  -- about which there is a broad consensus in India across the spectrum including the government sector -- the poor needs at least Rs 33 a day to make both ends meet. That works out to Rs 1,000 per month.

The Finance Minister says that our Budget cannot afford this. He believes, as does the CEA, that we can only pay Rs 21 per day to the poor and still expect poverty to disappear from our country.

This shows that our economic planners are living in a state of denial.


Published Date: Jun 13, 2017 03:43 pm | Updated Date: Jun 13, 2017 03:43 pm


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