Better alternative to income support schemes

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By admin April 17, 2019 10:22

Context

In the run-up to elections of 2019, government, as well as opposition political parties in India, have announced ‘basic income support schemes’, the main examples being the PM-KISAN announced in the interim budget and NYAY scheme announced by Congress in its election manifesto.

 

In these schemes, direct cash would be provided to individuals or families based on some defined parameters. In this article, we highlight the view of experts who are of the opinion that there are better alternatives to these income support schemes to end poverty in India.

 

What could be a better alternative?

 

According to some academics, Universal Basic Services (such as health, education and public services) in India would be more effective in reducing poverty as compared to providing income through cash transfers to certain sections of society.

 

How exactly would these Universal Basic Services (UBS) be better than income support schemes?

 

  1. Capability Deprivation

It means that an individual is unable to earn sufficient income through work or business he/she engages in, i.e. he/she is deprived of the capability to earn a certain basic income for a minimum standard of living.

 

  • Problem with income support schemes: The problem with these schemes is that they fail to remove the main cause of poverty which is capability deprivation. The schemes would try to fill in the gap between the earnings of a family/individual and the minimum amount needed for a decent life. However, this won’t enhance the capability of the persons to come out of poverty on their own but only make them dependent on direct cash transfers all their lives.

 

  • How providing universal basic services could solve this problem: Making services like education , health and other public services available to all will enhance people’s capability to come out of poverty on their own by enhancing their capabilities. For e.g., quality education will enable them to secure better jobs or be better at starting and succeeding at a business. Besides, Health expenditure is one of the prime reasons for pushing many households into poverty. If these are taken care of by the govt, it will free many households of the debt trap and consequent poverty.

 

  1. Selective Beneficiaries
  • Problem with income support schemes: They target only certain sections of people like farmers, etc based on certain parameters and leave out many other sections like poor urban labourers. Hence, the benefits don’t accrue to a large section of society.

 

  • How providing universal basic services could solve this problem: Providing UBS to all sections would ensure that no one is left behind and enhance everyone’s capability to come out of poverty.

 

  1. Opportunity Cost
  • Problem with income support schemes: If a large part of govt expenditure goes into these schemes, it will have an opportunity cost in terms of basic services like education and health as govt will have lesser to spend on these sectors. This would affect the standard of living of people.

 

  • How providing universal basic services could solve this problem: If the expenditure is done directly on UBS instead of income support schemes, it would not only take care of access to basic services and increased standard of living for all but also end up alleviating poverty in a more sustainable way.

 

  1. Penalizing states with better efforts at poverty alleviation
  • Problem with income support schemes: States which have made the east effort on poverty alleviation will tend to corner more of the funds of these schemes owing to more poverty-stricken people in these states. Ironically, this in a way penalizes the states who have worked to alleviate poverty significantly.

 

  • How providing universal basic services could solve this problem: If spent on UBS, all states stand to benefit almost equally in terms of the benefits that accrue from such expenditure.

 

In a nutshell

 

The public policy should focus on improving individual capability such as the increased opportunity of work & fair wage, rather than providing shortfall in income. An income-support scheme for any one section of the population is grossly inequitable. Health, education and physical infrastructure are central to the capabilities of individuals, and the extent of their presence in a society determine whether the poor will remain so or exit poverty permanently.

 

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admin
By admin April 17, 2019 10:22