Context: In the post corona crisis situation, India has to address many problems, of which the need for the institution of a scheme to provide minimum income support to the weak and vulnerable groups stand out.
- Universal basic income (UBI): There has been considerable discussion on UBI in recent years. Though, a universal scheme is easy to implement, feasibility is the critical question.
- NYAY: The Congress had suggested NYAY to help the poor. The problem with non-universal targeted programmes is that they will run into complex problems of identification and give rise to exclusion and inclusion errors.
To avoid the identification problem:
The three proposals which meet the objective of providing a minimum basic income to the poor and vulnerable groups in both rural and urban areas. These are:
- Give cash transfers to all women above the age of 20 years;
- Expand the number of days provided under MGNREGA and
- Have a national employment guarantee scheme in urban areas.
In all the three proposals, there is no problem of identification. A combination of cash transfers and an expanded employment guarantee scheme can provide a minimum basic income.
Give cash transfers to all women above the age of 20 years:
- This is an easily identifiable criterion because the Aadhaar cards carry the age of the person.
- The female population above the age of 20 is around 42.89 crore.
- Making available a minimum of Rs 4,000 annually as a cash transfer to all of them will cost Rs 1.72 lakh crore - 0.84 percent of GDP.
- This is in addition to the income from an expanded MGNREGA as given below. The cost of the scheme to the government will be less if the well-off women choose not to take the cash transfer.
Expanding MGNREGA in rural areas and introducing an employment guarantee programme in urban areas:
- Present state of MGNREGA: At present, MGNREGA is available only for 50 days of employment, although the Act guarantees 100 days of employment.
- In 2019-20, the government spent Rs 67,873(wage + material) crore for providing 48 days of employment to 5.48 crore of rural households.
- The government has increased the per day wage rate from Rs 182.1 in 2019-20 to Rs 202.5 in 2020-21.
- Ways to strengthen MGNREGA:
- Increase the number of days under the scheme from 100 to 150 in rural areas.
- Introduce an Employment Guarantee Act in urban areas and provide employment for 150 days.
- Estimated expenditure on expanded scheme: The total expenditure (wages and materials) is estimated to be Rs 3.21 lakh crore (1.58 percent of GDP) in 2020-21.
- The additional expenditure (apart from expenditure for generating 50 days of employment) needed for the proposal is Rs 1.9 to 2.5 lakh crore, around 1 to 1.22 percent of GDP.
Nation-wide urban employment guarantee scheme to improve livelihoods:
- The design of the scheme can be slightly different from MGNREGA.
- Nature of employment: In urban areas, employment can be provided to both unskilled and semi-skilled workers as there is demand for the latter workers also.
- A person working in MGNREGA and in the urban programme can get Rs 30,000 if 150 days are provided.
Advantages of initiating above proposals:
The total expenditure of the proposals could be lower. This is because
- Demand-based programme: The number of days availed by the employment guarantee programmes could be lower as it is a demand-based programme.
- Voluntary drop out: On cash transfers, some women, particularly from richer classes, may voluntarily drop out of the scheme or alternatively, it can be provided that everyone receiving cash transfer must declare that her total monthly income is less than Rs 6,000 per month.
Challenges: The feasibility of raising additional funds.
Way ahead: Raising additional revenue
- Removing tax exemptions so that the basic tax rate can be reduced.
- Some of the non-merit subsidies, another item of expenditure, can be eliminated.
In the post-COVID-19 situation, the Indian government needs to institute schemes to provide a minimum income for the poor and vulnerable groups. This will cost around 2 percent of GDP and will help the poor, informal workers, including the migrant workers, significantly reducing poverty.