Rahul Gandhi’s income guarantee scheme a game changer or a sham? Here’s what India needs instead

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Updated: March 26, 2019 12:41:20 PM

However, the way ahead is full of speed bumps. The scheme, which will benefit the 20 per cent poorest families, seems good from a welfare point of view, but will significantly increase the fiscal burden of the country.

Congress President Rahul Gandhi on Monday launched his latest attack on poverty by announcing that his minimum guaranteed income scheme known as Nyuntam Aay Yojana will provide up to Rs 72,000 annually to the poorest 5 crore families in India. The announcement has once again raised questions on the efficacy of such income support scheme in tackling poverty.

A minimum monthly handout of Rs 6,000 to poor households, those with a monthly income of Rs 12,000, will help in eradication of poverty as it offers a safety net to the poor against shocks such as income fluctuation, lack of employment and health issues, wrote The Indian Express today. The scheme also holds the potential of boosting farm gate prices and also consumption, wrote The Indian Express.

Hurdles in the way

However, the way ahead is full of speed bumps. The scheme, which will benefit the 20 per cent poorest families, seems good from a welfare point of view, but will significantly increase the fiscal burden of the country.

It may also face various other challenges such as identification problem, leakages, moral hazard problem and rolling out of important subsidies. Moreover, the unconditional nature of the scheme would mean that the beneficiary is free to spend the cash without any strings attached, said The Indian Express report.

Former Chief Economic Adviser Arvind Subramanian who initiated the debate on a Universal Basic Income in the Economic Survey 2016-17 computed that a quasi-UBI for 75 per cent population would work out to 4.9 per cent of the GDP.

Way ahead

In a policy paper by the Pune International Centre for the upcoming polls recommends that rather than spending money on a UBI, the state must focus on providing public goods and using resources better for ensuring the delivery of quality primary education, health and law and order.

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The suggestion holds importance in the light of the findings by 14th Finance Commission which has showed that in terms of total outlay, government investments and exemptions, only the richer states gained.

On the same lines, EY chief policy advisor D K Srivastava said to Financial Express Online that the government should address the structural problems of the agricultural sector and encourage private investments in the sector. Economically, it is more efficient to address the rural distress, he said.

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