[op-ed snap]Maximum gambit

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Mains Paper 3: Economy | Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

From UPSC perspective, the following things are important:

Prelims level: Basics aspects of Universal basic income.

Mains level: The news-card analyses the issues and challenges in the implementation of universal basic income as suggested by NYAY.


NEWS

CONTEXT

Congress party’s has promised of transferring ₹6,000 a month to poor households

Nyuntam Aay Yojana (NYAY)

  • This would be a flat transfer of ₹6,000 a month to identified poor households.
  • There has been little word on how the Congress expects to finance NYAY.
  • A ballpark estimate of the fiscal expenditure, to transfer ₹72,000 every year to the poorest 20% of the approximately 25 crore Indian households, would be ₹3.6 lakh crore.
  • This is twice the estimated amount set aside for food subsidy and five times that for fertilizer subsidy in the 2019-20 Union Budget.

No details on financing the scheme

  • It is not clear whether the Congress, should it come to power, will cut back on other subsidies and programmes in order to finance NYAY.
  • There is also the additional problem of the identification of the poor — the Socio-Economic and Caste Census of 2011 is the most comprehensive exercise for this, but it has been riven by reliability and authenticity issues and has only been partially released to the public as yet.
  • By having an inbuilt provision of targeting the beneficiaries, NYAY can fall short as other programmes have, such as the targeted public distribution system.

Prospects Of NYAY

  • An unconditional transfer of a specified minimum income support to the poor will go a long way in helping address immediate needs related to health, education and indebtedness.
  • A large section of the targeted poor would include landless workers and marginal farmers in rural areas, and unemployed youth in families engaged in menial labour in urban areas.
  • Besides shoring up income to meet such basic needs and pushing wages upwards, the transfer scheme can help spur demand and consumption in rural areas in particular.

Challenges in the scheme

  • There are disincentives inherent in the scheme as well.
  • A section of the beneficiaries could withdraw themselves from employment.
  • this could be mitigated by the expected overall spur in demand in the economy through consumption, and by the rise in real wages consequent to the shrinking of the labour market.

Conclusion

  • Limited cash transfers in the form of direct farm income support in States such as Telangana and Odisha have helped ameliorate agrarian crises.
  • This was the reason why the BJP-led government came up with the PM-KISAN Yojana as a countrywide scheme.
  • A massive programme such as NYAY, however, has no precedent. It might give a fillip to the Congress election campaign, but much more homework is required for its implementation.
  • A dole is not a magic bullet; it can only be one among a clutch of robust and prudent welfare policies.
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