Minimum income guarantee–is it a carrot tied to a stick, to lure the Indian donkey?

It is election season once again and the political parties of India are getting ready to put up the most spectacular show. Politicians are out on the streets radiating promises on mikes, whilst their social media teams are busy strategizing and negating the competing teams.

Three days ago, Rahul Gandhi managed to create a huge ripple across the Indian political arena by promising a variation of Universal Basic income (UBI) to poor in India, called minimum income guarantee . According to the scheme, people who earn below a certain adjudged income will be provided a fixed income annually. Though, the amount is not going to be the same for every poor family, as Congress’s data analytics department has already confirmed.

Everything that glitters is not gold! Using the same logic, minimum income guarantee comes with no guarantee that it can help allay the woes of poor in India, which according to statistics, is about 22% of the total population of the country. Three years ago, in 2016, a referendum on Universal basic income was rejected by the people of Switzerland, as it was evident that once the policy is implemented there will be disconnect between the amount of work done and the money earned.

While Minimum income guarantee scheme was announced with gusto by the Congress supremo during a rally in Chhattisgarh, there’s ambiguity on how the scheme will impact the already existing welfare schemes like Mid-day meal, food security act, public distribution system etc. Welfare schemes like Mid-day meal has ensured near universal enrollment, but once money is transferred to beneficiaries under such schemes, what is the guarantee that the poor will find any motivation to send their children to school? Chances are, poor in the country will be forced to choose between minimum income guarantee and the existing welfare schemes. This so because India is neither one of the richest countries in the world to be able to afford both the options to its citizens, nor does a burgeoning population ease the situation. According to economic survey 2016-2017, even if Rs 12000 were to be paid to every rural household then the fiscal cost will be 11% of the GDP.  

Source:
Economic Survey Report RBI 2016-17

Many European experts have called such schemes a welfare trap or a poverty trap, which intends to keep people dependent on the state for welfare and to trap them in the cycle of poverty, till eternity.  This scheme is also but an example of the perverse incentive, where in the individual gets an incentive to avoid raising productivity because the resulting income gain is not enough to compensate for the increased work effort.

Let us give Congress a benefit of doubt, despite the 12 digit telecom scam in dollars that leaders from this party and its allies were involved in. Congress’s good intentions itself would not help get tangible results from this scheme. Implementing this scheme will be a herculean task and adding to the woes will be issues like lack of labour for work, gender disparity, rich also availing benefits, social spending on alcohol and tobacco etc.

Clearly, the idea is to push BJP to the brink, and force ‘em to come up with an equally vacuous yet lucrative promise, making it an intangible dream to achieve, after the elections are over. Thus minimum income guarantee, ensures a victory for Congress even if it were to lose the Lok Sabha elections, by keeping BJP on tenter-hooks. This is definitely a master stroke by Congress’s strategists, to help gain some wind in the party’s torn sails. But the million dollar question is, will such a scheme catapult Indian economy to greater heights? Ruminate!

This article is written by Levina

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of SatyaVijayi.

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