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Minimum Income Guarantee: How, what, when?

A guaranteed basic income through direct cash transfer could be more effective in supporting low income households when existing support programs like the Public Distribution System have not proved very effective.

Hari Hara Mishra        Last Updated: February 8, 2019  | 15:50 IST
Minimum Income Guarantee: How, what, when?

'Nothing is more powerful than an idea whose time has come,' said Victor Hugo. Minimum Income Guarantee is one such idea in a developing country like India with huge inequality in distribution of wealth - where large numbers of billionaires co-exist with large poor populace in the world.    

The International Monetary Fund (IMF) in its 'Universal Basic Income - Debate and Impact Assessment', which released in December 2018, dwelt upon may critical aspects. A guaranteed basic income through direct cash transfer could be more effective in supporting low income households when existing support programs like the Public Distribution System have not proved very effective.

Four critical aspects dealt in the above referred paper are pertinent to introspect.

1. Why? What Goals

2. Who?

3. What? How Much?

4.When?

Goal 

In India, in absence of a universal social security net, implementation of a minimum income guarantee will help tackle poverty and inequality more effectively and help redistribution. This will improve productivity on a macro level in view of enhanced quality of life of the deprived sections of society.

Target

   

The target should be those at the bottom of the pyramid living below poverty line, irrespective of caste, creed, religion etc. According to expert committee of Planning Commission headed by Mr Rangarajan - with new poverty line definition of Rs 32 in rural areas and Rs 47 in urban areas, number of rural poor was estimated at 260 million and 103 urban poor in 2015.

Levels of Transfer

This needs a lot more analysis based on empirical data at various sources in government and other agencies. As benchmarking each individual's needs may be impracticable, common benchmarking methods to calibrate the transfer as a fraction of poverty line or median income can be attempted.

Periodicity

Next issue to be addressed - the periodicity of transfer - monthly, annual or one time. To start with, it could initially be annual to avoid recurring implementation issues at the starting point, subject to review after half year to study impact assessment and fine-tuning implementation efficacy.

And Finally, Challenges...

There are many challenges in respect to identifying the beneficiaries, funding of the resources, effective implementation etc.  However, there are facilitating factors with UID in the form of Aadhar, large enrolment in Basic Savings Bank Deposit Accounts under Jan Dhan Yojana.

At present, according to various estimates there are 950 schemes and sub schemes including Food Subsidy provided through Public Distribution Scheme, accounting for five per cent of GDP, many of which can be scrapped for inefficient delivery. So, finding resources for implementation of the Basic Minimum Income may not be that big a challenge as it is made out to be or a strain on fiscal prudence.

It must be kept in mind that poverty anywhere is a threat to prosperity everywhere (ILO Declaration of Philadelphia, 1944). And Minimum Income Guarantee is not a choice, but a historic compulsion for world's sixth largest economy at $2.6 trillion.  

(Hari Hara Mishra, Director, UV Asset Reconstruction Company Limited)

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