Targeted basic income transfer scheme

Why in news?

• What PM Modi’s speech of December 31 made clear was that India was firmly moving away from the anti-poverty policies pursued by all previous governments.
• The new approach, made possible by technology, is to get away from the Amartya Sen-advocated in-kind income transfers to some version of cash transfers.

What is an in-kind poverty alleviation policy?

• Two major in-kind poverty alleviation policies in operation are the PDS and MGNREGA. Both involve largescale government involvement.
• PDS – the government (FCI) involved in procurement, storage, transport and distribution of food.
• MGNREGA – the government planning projects, employing people, on what is touted as the largest work programme in the world.

What is the performance of PDS & MGNREGA?

• Study after PDS study has proven, that only 50 per cent of food procured and stored by the government reaches anybody, rich or poor.
• Where does this 50 per cent go? Towards the generation of black income for corrupt officials, liquor manufacturers, food mills, etc.
• With the MGNREGA, where jobs are allocated to ghost workers and panchayat leaders.

How DBT will change the scenario?

• Helped by technology and Aadhar, the Direct Benefit Transfer (DBT) scheme has gathered considerable momentum over the last few years.
• A logical expansion of the DBT is the policy of Universal Basic Income (UBI), a guaranteed minimum income to all (population, adult, worker etc.,).
• The Economic Survey will contain a large section on UBI. For those interested in efficient redistribution of income, this news is extremely welcome.

Is Tendulkar definition now obsolete?

• The defining line for the absolute poor should not be absolute — it should increase with the level of per capita income and should include the lower middle class.
• The Tendulkar definition of poverty is now obsolete; it captures too few of those deserving income transfers.

How much do we need to transfer to reduce the poverty level?

• A poverty line some 22 per cent higher than the equivalent Tendulkar poverty line of Rs 1,250 for 2016-17 yields a national poverty rate of 20 per cent.
• The poverty gap is defined as the difference between the average consumption level of the poor and the relevant poverty line.
• To reduce this new absolute poverty level (20 per cent of population) to zero, the government needs to transfer, on an annual basis, Rs 1 lakh crore (lc), only 0.7 per cent of GDP.

Is this an efficient way?

• At present, via PDS and MGNREGA, the government spends Rs 1.75 lc (PDS 1.35 lc and MGNREGA 0.4 lc).
• The demonetisation policy will allow increased personal income tax collections, possibly around Rs 1 lc to Rs 1.5 lc annually. Thus, Rs 3 lakh crore is available with the government for redistribution if it decides to scrap PDS and MGNREGA.
• So, it is an efficient way for the government to eliminate poverty on an ongoing basis, and to help the lower middle class as well.
• Besides, if the government is serious about rooting out corruption, no better place to begin.
• Without any strain on the budget, the government can transfer Rs 3 lakh crore to 265 million people, or approximately Rs 1,000 per person per month.

Conclusion:

• Chief Economic Adviser Arvind Subramaniam has stated that the new Economic Survey will contain a large section on UBI.
• For those interested in efficient redistribution of income, this news is extremely welcome. 
• If such a targeted basic income transfer scheme is announced in upcoming budget, it will be an economic and political masterstroke.

Category: Mains | GS – III | Economy

Source: Indian Express