Insights into Editorial: The case for minimum basic income
- February 1, 2019
- Posted by: InsightsIAS
- Category: EDITORIALS
Insights into Editorial: The case for minimum basic income
A Minimum basic income is a government guarantee that around 20-25% of citizens receives a minimum income. It is also called a citizen’s income, guaranteed minimum income, or basic income.
The payment is enough to cover the cost of living. The goal is to provide financial security. The concept has regained popularity as a way to offset job losses caused by technology.
Economists admit that a lot more must be done to improve education and health care, and to address the persistent informality and small scale of enterprises that are providing most of the employment in the country.
The advantage of a minimum income guarantee is that it will also cover the urban poor, who are not covered in these schemes.
Job guarantee programmes, such as the Mahatma Gandhi National Rural Employment Guarantee Scheme, lock up beneficiaries in low-productivity work, income supplements allow them to continue to look for better employment options.
UBI and MIG difference:
The essential difference between Universal Basic Income and Minimum Income Guarantee is this:
- A universal basic income provides a monthly stipend that would ensure that a person would be above the poverty line without any other source of income.
- Thus, the Economic Survey of India suggested a UBI of Rs 7,620 per annum to 75 per cent of India’s population.
- The proposed minimum income guarantee will cover 22-25% of the population (as fixed by Tendulkar) or 29.5 per cent (fixed by Rangarajan).
- The income was based on Tendulkar’s poverty line of 2011-12 inflation-indexed to 2016-17.
- A minimum income guarantee, is pretty much at the discretion of the government of the day: it can be equal, more or less than the poverty line expenditure.
Reasons that supporting “Minimum Basic Income”:
- The reforms since 1991 have largely bypassed agriculture and other segments of the economy that engage poor and rural Indians.
- Due to incomplete economic liberalisation and technological advances have led to growth in national income, but all individuals have not gained equally.
- The disproportionate share of gains from the reforms have gone to middle-class and rich Indians.
- This unevenness in development calls for a superior economic growth model.
- Redistributive policy interventions such as income transfers can improve equity.
- Besides equity, there’s also an urgent need to address rural distress, which is largely a consequence of policy failures such as:
- Ineffective procurement and perverse trade and pricing policies that have in times of bumper harvests led to gluts, depressed market prices, and
- Aggravated farmer losses.
Minimum Basic Income in the other Productive way in Agriculture sector : Rythu Bandhu and KALIA are superior policy intervention:
They do not suffer from the moral hazard and limited reach of farm loan waivers. Waivers penalise farmers who repay loans on time and benefit only borrowers from banks.
Telangana and Odisha, are already experimenting in a limited way with income support schemes, focused on the farm sector:
- In Telangana, the government is providing farmers income support payment at the rate of ₹10,000/ha (₹4,000/acre).
- However, this model, the Rythu Bandhu, benefits the biggest landowners the most, including those who lease out their land.
- Tenants, sharecroppers and landless labourers, the most vulnerable, are out of its coverage. Its success depends on reliable land records.
Odisha’s recently notified KALIA (Krushak Assistance for Livelihood and Income Assistance) irons out these creases:
- It proposes to transfer ₹5,000 in cash per season (₹10,000 per year for double-cropped land) to the State’s 30 lakh marginal farmers, leaving out the two lakh large farmers.
- It promises cash grants of ₹12,500 each to the State’s 10 lakh landless households.
- The hope is that they will use this money to rear goats or poultry and farm mushrooms or honey.
- Fisherfolk are covered too, and will receive the investment support for buying fishing nets and allied equipment.
Way Forward: Economists gave idea that to Mobilise Money for Providing Basic Minimum Income:
On an average, it is coming Rs. 1,50,000 Cr each year to those, who least need them.
According to Government official records, In fiscal 2016-17 for which we have complete account, government gave away a staggering Rs. 1,56,000 Cr to businesses under incentives, relief, concessions.
These are massive discounts on corporate tax and breaks on profits for entities in Special Economic Zones. 99.94% companies are paying maximum effective tax, around 29%.
On the other hand, India’s richest 335 companies, with profits greater than Rs. 500 Cr, get sops and pay around 23% to the exchequer.
So, Out of India’s 300 million households, 50 million participated each year in Mahatma Gandhi NREGA during its most successful years.
If India scrap all the subsidies / tax concessions for companies, we can divert this to the poor families. Each poor household would receive an average of Rs. 30,000 every year.
This can be done without subtracting one paisa from existing farm or food subsidies.
An alternative approach to Minimum Basic Income is Universal Basic Capital:
A better solution to structural inequality than UBI is universal basic capital, or UBC, which has begun to pop up in international policy circles.
In this alternative approach, people own the wealth they generate as shareholders of their collective enterprises. Amul, SEWA, Grameen, and others have shown a way.
A simplistic UBI will not solve the fundamental problems of the economy.
An unavoidable solution to fix India’s fundamental problems is the strengthening of institutions of the state to deliver the services such as of public safety, justice, and basic education and health, which should be available to all citizens regardless of their ability to pay for them.
The institutions of the state must be strengthened also to regulate delivery of services by the private sector and ensure fair competition in the market.
The building of state institutions, to deliver and to regulate, will require stronger management, administrative, and political capabilities will be the need of the hour.