The idea of a universal basic income is wholly inappropriate for a developing country like India. What is more appropriate is a targeted basic income. Nor is the basic income concept akin to a negative income tax like what the Congress has espoused. So it is quite bizarre that a party that boasts of a number of intellectual economists is coming up with a completely messed up programme as this. Even if for a moment one assumes zero implementation problems, it is a flawed concept.
Most economists have been advocating a targeted programme and what is called a ‘top up’ programme which says I know what your consumption or income is and I think you should have more so I give that additional amount. The design of the Nyay programme says that each family, regardless of anything, will get 6,000 rupees. And that is faulty.
Politically speaking, if you are giving money to the bottom 20 per cent of the poor, they are very happy but you have alienated the other 30 per cent ‘poor-to-middle’ category.
In other words, I see it as an act of desperation by the Congress. I find it very sad that the Congress, instead of celebrating the decline of poverty in India which they brought about, is saying ‘No, nothing has happened’. After all, of the past 70 years, the Congress was there for all but 10. And from 2004 to 2011, India recorded good growth and poverty declined further.
Even if you assume that there has been no improvement in poverty from 2011 or even from 2014 onwards, then too this programme is absurd. Look at the Congress manifesto: the party accuses the BJP of not increasing the Minimum Support Prices (MSP). But I believe MSP is one of the most corrupt programmes that benefits only the top 10 per cent of farmers, besides the politicians. Why should we have MSPs? Why not cash transfers? The BJP realised its error and finally opted for cash transfers to farmers.
Look at it globally. No country has ever done this or a transfer like Nyay. What Finland and Switzerland were doing was to try out a universal basic income after a referendum on the issue, where everybody gets a certain amount. I am not a supporter of universal basic income at all and I don’t think it works even for advanced countries.
I also think that, partly, the present government messed up the discussion on universal basic income in the Economic Survey. I have consistently supported cash-back transfers to both support income levels of the poor and to improve efficiency of government expenditures.
There is a conventional belief among economists and also in the World Bank that if you hand out cash to farmers, they will indulge in wasteful spending. In 1995, a Berkeley economist studied how cash subsidy to farmers was being spent. He found that 80 per cent was being investedThat started the train of thinking in academia and among policy makers as to whether to begin cash transfers or not.
In 2000, I wrote a detailed analytical academic piece on poverty which is where I suggested that India should move towards cash transfers for the poor. After all, we had been doing ‘in-kind’ transfers for the previous 25 years—the Public Distribution System (PDS) being a classic ‘in-kind’ transfer. Back in 1985, Rajiv Gandhi deputed young IAS officers to study the process and that is when he came up with his classic assertion that only 15 paise of a rupee meant for the poor actually reaches the poor. Study after study had documented that for India.
I studied the issue comparing the transfers in PDS as well as NREGA targets and found that only 15 per cent reached the poor. But now we have technology to identify the cash transfers and the beneficiaries and the wherewithal to target them very efficiently.
Coming back to Nyay, we are already giving PDS subsidies, we give fertilizer subsidies etc.. But would it be better if we just gave them the cash equivalent to that subsidy? The Nyay programme doesn’t want to remove any existing subsidies. They want to have it as a ‘add on’.
The supplement to the poor comes in if you now look at the Indian Tendulkar poverty line in 2019-20, according to which only about 3-4 per cent of the population is living below the Tendulkar poverty line. I consider that absolutely unacceptable that the poverty line should be so low. So I have been advocating the increase of the poverty line for India. Obviously you cannot increase or decrease the poverty line when you are poor but as the income grows we should increase the poverty line which we haven’t done. What most of the countries in the world have moved to is a relative poverty line.
So, I am for increasing the poverty line, I am for cash transfers as I want the poor to get more. Because society is now much richer than what it was.
(As told to Sanjib Kr Baruah)
(Surjit Bhalla is an economist, author and columnist, and a former member of the PM’s Economic Advisory Council)
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Updated Date: Apr 05, 2019 14:48:46 IST