Basic income scheme is more efficient way of delivering welfare to poor: Do BJP and Congress have resolve to implement it?

Will Congress president Rahul Gandhi’s shock announcement of a minimum income guarantee to every poor person if his party comes to power in May be the game changer it is being touted to be? In terms of election discourse, most certainly. Gandhi has clearly stolen the thunder from the Narendra Modi government, which was widely expected to announce some form of basic income programme in the budget on Friday. Of course, the government can well turn around and say it never intended anything of the sort and this was only media speculation. But even if the Modi government doesn’t make this part of the budget announcement, the Bharatiya Janata Party (BJP) could come up with an even more ambitious scheme of its own as an election promise. [caption id=“attachment_4049101” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] Whether Gandhi’s announcement will be a game changer in terms of election results (for the party with the more attractive scheme), is not so clear. That would depend on how much the electorate believes such promises. When it comes to making an actual difference to the lives of the poor, the game-changing potential comes down to almost zero. Most discussion around basic income – universal or quasi universal – has revolved around financing: where will the money come from, will this be in lieu of or in addition to, other welfare schemes? Praveeen Chakravarty, head of the Congress data analytics cell, said on CNBC-TV18 that the programme will be fiscally prudent and one could look at new revenue streams and rationalise expenditure; these will be detailed in the Congress manifesto. But even if money is found for the programme – by axing other welfare schemes or other revenue generation steps – the real question is: will the bureaucracy deliver? The main implementation challenge will be in terms of identifying beneficiaries. Right now, we have only the Congress proposal to go by and it is not a universal basic income (which means even Mukesh Ambani and Munna panwari will get the payout). Even if the BJP comes up with a counter scheme, it is not likely to be universal; forget the financing part, it is just not good political optics. Even in the Congress proposal, there is no indication about the cut-off income level for eligibility. As Pronab Sen, former chief statistician and now head of the India Growth Centre, pointed out in a television panel discussion, governments have been “spectacularly unsuccessful” in targeting exercises. Take the case of the very ambitious National Food Security Act (NFSA), which was supposed to cover 81.34 crore people nation-wide.

Within this overall figure, the erstwhile Planning Commission had worked out, for each state, the number of people to be covered, with rural-urban break up. States then had to enrol people under NFSA and identify eligible people based on criteria each was free to work out.

A 2016, a Comptroller and Auditor General (C and AG) report found that many states had not undertaken a fresh exercise for identification, but merely stamped existing ration cards as NFSA compliant. Some states like Delhi had included the ineligible while Assam had excluded the eligible – in two districts, the local administration had arbitrarily reduced the number of beneficiaries in 41 priority list families (under NFSA, there is a priority list and an Anna Antyodaya Yojana list). This problem is not confined to one or two states or to one or two programmes. How can this problem be dealt with? A paper that former chief economic adviser Arvind Subramanian co-authored with three other economists, Quasi-Universal Basic Rural Income (QUBRI): The Way Forward, has suggested having exclusion, rather than inclusion, criteria. That is, identify those who will not be eligible, people owning certain physical assets, for example. This is to be determined by the socio-economic caste census (SECC), which gives extremely granular data on income and asset ownership. Chakravarty also said that the SECC enables better targeting than before. But while the rural SECC report is available and largely accepted, there is still a question mark over the urban SECC report. So unless any income transfer programme is focused only on the rural poor (as the QUBRI idea), targeting will continue to be hugely problematic. Once the identification hurdle is crossed, there is the challenge of ensuring that money reaches the bank account of the beneficiaries. This is not as vexed as it once was because of the JAM (Jan Dhan accounts, Aadhaar, mobile banking) trinity. But it would be unwise to think there are no problems at all. The experience of cash transfers in lieu of food pilots in Chandigarh and Puducherry (where there have been payment transfer problems) and the glitches that come up in the case of Aadhaar authentication for public distribution system (PDS) and for pensioners are very real.

The instances of problems may be very low, but this is one issue in which percentages don’t matter. Even one person not getting the monthly payment will be one too many. The Congress proposal has an additional complexity. It is pitched as a ‘progressive’ scheme.

According to Chakravarty, a certain income threshold will be set and the income transfer will be like a gap funding of the extent of variation between the income of a particular household and the income threshold. So if a family’s income is Rs 1,000 a month and the income threshold is Rs 2,000, then it will get Rs 1,000 as income support; a family with an income of Rs 1,500 will get only Rs 500 as income support. Now, there are conceptual problems with this, but apart from that how is the income of a family to be determined when the majority of the poor may be in informal employment, being paid in cash? And who will determine this? On the face of it, this will only open up avenues for petty corruption and income transfer of quite another kind. This is not to knock the idea of a basic income programme. Conceptually, it is a more efficient way of delivering welfare than the numerous current schemes which are either price distorting (like subsidised goods and services) or are extremely cost-ineffective to deliver. The public distribution scheme, for example, checks both these boxes. A basic income payout also gives the poor agency, believing they will make informed choices, which other programmes do not; they dictate that the poor will have to be satisfied only with, say, cereals distributed through the PDS or poor quality government schools. But for a basic income scheme to make a difference, a lot of investment in improving state capacity is required. Do the BJP and Congress have the determination to do that? Or will they, when they come to power, realise they have bitten off more than they can chew and do zilch on both, giving lame excuses for not fulfilling their poll promise? Wait till a few months after May to find out. (The writer is a senior journalist and author. She tweets at @soorpanakha)     To keep watching India’s No. 1 English Business News Channel – CNBC-TV18, call your Cable or DTH Operator and ask for the Colors Family Pack (inclusive of 24 channels), available for Rs. 35/- per month, or subscribe to the channel for Rs. 4/- per day. To keep watching the Leader in Global Market & Business News – CNBC-TV18 Prime HD, call your Cable or DTH Operator and ask for the Colors Family HD Pack (inclusive of 25 channels), available for Rs. 50/- per month, or subscribe to the channel for Rs. 1/- per day.