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Insights into Editorial: Why emergency basic income a must now for India

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Introduction:

The prime minister’s appeal for a nation-wide ‘self-imposed Janata curfew’ has been a success.

It has demonstrated that people can go beyond their political leanings and cooperate with the government to face the challenge posed by the coronavirus pandemic.  But extraordinary times call for extraordinary measures.

India’s informal economy has about 50 crore working persons and would be among the most affected by the COVID-19 related shutdowns.

Need of relief to millions in the informal economy:

Explaining the rationale for the amount sought as EBI (emergency basic income), Experts argued that it should be linked to the International Poverty Line of daily per capita expenditure of $1.90 rather than the Indian poverty line that had not been revised in more than a decade and was estimated on the basis of per capita consumer expenditure.

Similarly, crossing all political boundaries, a broad consensus is emerging about how to provide relief to millions in the informal economy who are staring at an uncertain future without their daily wage.

Even as the central government is preparing a strategic plan, which includes cash transfers, opposition parties have made an appeal to the government to provide a basic income to people.

Confederation of Indian Industry has joined this view and announced that a one-time cash transfer should be given. They went a step ahead by pointing out where the money should come from the savings from the global crude oil price fall.

Packages for the lower trodden people by various countries:

IMF economist Gita Gopinath has argued for a preservation of the economic system while the Great Lockdown lasts.

Singapore and Japan, which contained the disease spread initially, have re-introduced harsh lockdown measures to deal with a second wave of infections.

The US announced a $2.2 trillion stimulus on a $20 trillion GDP base.

Malaysia, whose per capita income is four times that of India, has announced a package that is 16 times bigger.

Even poorer neighbour Pakistan has a much larger covid-19 response package (as share of its GDP) compared to India.

Thailand, whose per capita income (PPP) is a little more than two times that of India, has announced a package that is 10 times bigger (as a share of GDP) than India.

Need of much consistent support for Informal and Unorganised people:

  1. We need to focus on immediate and urgent support through cash transfers, and discard plans that are difficult to implement at the pace that is required now.
  2. Some states have announced enhancement of rations under the Food Security Act. While providing additional food grains is useful, with broken supply chains and crumbling logistics, this may be difficult to implement.
  3. Small and medium enterprises that are at the forefront of this tsunami will immediately start laying off their workforce.
  4. Mild moral appeals to them not to do so, or to give paid leave to their workers is unlikely to work since during a crisis like this, it is difficult to monitor.
  5. Employment arrangements in these enterprises are mostly invisible to the public eye, and are impossible to effectively track.
  6. Apart from the government, there are two other key actors that should join this rescue operation—the corporates (CSR), and the local community.
  7. The challenge before us now is to design how these transfers have to be made—fool-proof, and leak-proof.

How does India launch a relief programme at scale without compromising macroeconomic fundamentals?

  1. One approach could be to have a generous, but provisional aid programme, which is unconditional and universal. We can call this an EBI (emergency basic income).
  2. However, without resorting to some off-budget borrowings, it may not be possible for the Union government to fund such a programme.
  3. Even if the government cuts back on some non-essential expenditures (establishment costs, for instance) and pools funds for certain welfare schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme for an EBI, it may still not be enough to fund a generous EBI, suggests an analysis of budget documents.
  4. Implementing EBI will be the harder challenge compared to funding it. Although almost everybody has a unique ID by now (Aadhaar), not everyone has a functional bank account or access to mobile or internet (for e-transfers).
  5. The latest district-wise data on these parameters come from the National Family Health Survey for 2015-16.
  6. It showed that despite gains in access to bank accounts and mobile phones, there were still significant disparities across districts. Internet access was limited across most districts.
  7. Hence, EBI must also include an in-kind transfer component. The ratio of cash to in-kind transfers is something that is best left for states to decide.
  8. The Centre’s role should be to enable funding for this programme so that states can focus on fixing implementation glitches rather than having to worry about finances at a time when their resources are already stretched.

Conclusion:

Experts advocate that an emergency basic income be provided through the direct cash transfer mechanism that Government of India has implemented.

This will not only arrest potential social unrest but also ensure that there is continued aggregate demand to sustain our economy.

We cannot be caught flat-footed. This is the political imperative which will be a crucial test for many a public representative.

They will face the brunt of people’s problems and frustration as they grapple with the situation on the ground. It is already happening as state governments start addressing a situation way out of their control.

The political imperative has just become that much greater for unleashing the power of the universal basic income.

Like other countries, India too could explore unconventional options, such as a special purpose vehicle, to fund this programme as long as the Great Lockdown lasts.