There is a way to deliver a minimum income guarantee — but Congress hasn’t found it | The Indian Express

The criticisms of this scheme are not about cost. Rather, they are about its workability and the possibility of other and better ways of using fiscal resources.

The Congress party’s recent declaration that, if voted to power, it will seek to ensure a minimum income to 20 per cent of the poorest households in the country, is laudable in intent. It also brings back policy attention to the penury and insecurity that continue to plague much of India’s population, and particularly the most destitute. But, as presented, it is completely unworkable — and if the Congress is really serious about the goal of eliminating poverty, it will have to think of a different way of reaching it.

Consider the broad outlines of the scheme that was announced. The proposed minimum income has been set at Rs 12,000 per month. This is a remarkably high level, given that minimum wages in most states are well below this and even the remuneration by the central government to anganwadi workers and ASHAs is less than one-third this amount. The bottom 20 per cent of households are to be provided a cash transfer directly into their bank accounts, of a maximum of Rs 6,000 per month (or Rs 72,000 per year) which presumably will bring them up to this level. Around 50 million households are expected to benefit from this.

The fiscal costs of this are not as much as might be imagined. At Rs 3,60,000 crore, the maximum anticipated expenditure amounts to just under 2 per cent of GDP. This is only one-third of the amount that is regularly given away as tax concessions to corporates and rich individuals, and there are many ways of raising such an amount that are available to a committed government. Of course, if this is to replace any other government spending then the matter becomes more problematic, because other welfare schemes (like maternity benefits, scholarships, etc) have different and very specific purposes. That is why the statement of a Congress spokesperson that other schemes will be “rationalised”, raises major concerns.

The criticisms of this scheme are not about cost. Rather, they are about its workability and the possibility of other and better ways of using fiscal resources. The identification of households is just the first problem. Contrary to what is being claimed, the Socio-Economic and Caste Census conducted in 2011-12 did not even attempt to measure the incomes of households. Instead, it used a variety of other metrics to estimate multidimensional poverty, which, in turn, became the basis for identifying possible beneficiaries of schemes intended for the poor.

Incomes are notoriously hard to measure or estimate: The few surveys (such as the India Human Development Surveys) that have tried to measure income have done so for a much smaller sample (not a full census of all households) and on the basis of a long, time-consuming questionnaire that requires additional estimations by investigators. In any case, incomes change over time. Those who were classified as poor in 2011-12 may not be so today, while others may have become poor in the meantime.

Trying to measure incomes today would obviously face the problem of respondents wanting to game the system by reporting incomes lower than those they actually receive. With self-employed workers — currently around half of the workforce — such measurement becomes even more difficult if not impossible. Even regular and casual paid workers in informal work often have incomes that vary by week and month. To establish the bottom 20 per cent would require estimating the incomes of everyone — a logistical nightmare, and an administratively expensive and oppressive process.

via There is a way to deliver a minimum income guarantee — but Congress hasn’t found it | The Indian Express

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