Government evaluating pros and cons of income transfer scheme, says report

Ever since the demonetisation of Rs 500 and Rs 1,000 notes happened, there has been speculation that Prime Minister Narendra Modi may be looking at ways to fulfill one of his high profile poll promises in 2014 - that once he comes to power he will get hold of the black money and transfer Rs 15 lakh into each Indian's account. Media reports now say the government is discussing some thing of this sort, but definitely not the Robin Hood style fund transfer.

According to a report in The Economic Times today, the government is considering an income transfer scheme that will form the basis of a national security system. The government is weighing the pros and cons of such a system, whether it should be a universal basic income scheme or a targetted transfer of funds for the economically weaker sections.

The website of the Basic Income European Network (BIEN) defines basic income as "a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement".

 Government evaluating pros and cons of income transfer scheme, says report


Recently the Business Insider had published an interview with Guy Standing, a proponent of basic income and cofounder of BIEN, in which he was quoted as saying that the Indian government will publish a report in January which endorses the idea saying it is "feasible" and is "basically the way forward".

The news was picked up by many media outlets to say the government may be looking to announce such a scheme in the Union Budget 2017 to be presented on 1 February.

However, Standing, who was the first speak about the Indian government's initiative, has clarified that he did not say that Prime Minister Narendra Modi is about to announce the scheme but just that the Economic Survey to be tabled in Parliament ahead of the budget would have a chapter dedicated to this.

The clarification has been issued to the Basic Income News published by BIEN.

“I never said Modi is going to introduce a basic income, and never said that I knew that. What I said to the Business Insider journalist who interviewed me for about half an hour on the phone, mainly on other matters, was that the pilots taking place in Finland and elsewhere were helping to legitimise basic income, that our pilots in India had helped legitimise the topic in India, that the Indian Government was contemplating introducing basic income and was issuing a chapter in its forthcoming Economic Report to be tabled in Parliament at the time of the budget. I am hopeful, I told him, but we will have to wait to see.” said Standing.

Despite Standing's clarification, one thing is for sure - the government is indeed looking at something similar.

A report in Huffington Post India recently said India is inching towards a trial run of a universal basic income, citing "conversations with dozens bureaucrats and economists.

The article also noted that despite a section of economists cutting across the Left and the Right spectrum supporting the idea, it could turn out to be political hot potato. The reason for this is that in order to get the required funds for such a scheme, the government will have to cut the subsidies and anti-poverty schemes.

"Despite public disgust with corruption and leakage in government schemes, removing large anti-poverty schemes and subsidies will be viewed negatively by the public and will be a shock to the system," the report said.

However, The Economic Times report today says, "The debate is between a widely accessible universal basic income that may stretch the social security net too thin and targeting specific groups."

According to the report, if it is going to be a targeted income transfer, the government will be able to garner the data identify the economically weaker sections using the Jan Dhan accounts and Socio-Economic and Caste Census of 2011. The estimated expenditure for the scheme in this case is put at Rs 3 lakh crore per year.

"..One idea is to put income in the hands of the woman of the household so that funds are better utilised," the report says.

The discussion on universal basic income in India comes at a time when it is a subject of hot debate in Europe. Finland has just started an experiment with such a scheme wherein the government is offering 560 euros tax free every month to a group of 2,000 people aged between 25 and 58. The experiment is for two years.

An article by Remy Raisner, CEO of Proteus Capital Management, in Huffington Post links the increasing acceptance for the idea of universal basic income in the Western world to heightening job insecurity due to the rise of artificial intelligence and technology. According to him, there is a need to appease unhappiness, discontent and the potential for civil unrest, which may prepare the background for universal basic income.

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Updated Date: Jan 31, 2017 13:36:08 IST