Providing a minimum basic income post-Covid will require some novel approach. This article proposes an approach with the mix of direct cash transfer and changes in the employment guarantee scheme.
Non-universal targeted programs
- It is true that a universal schemes are easy to implement.
- Non-universal targeted programmes face the problem of identification.
- Narrowly-targeted programmes will run into complex problems of identification.
- And the problem of identification gives rise to exclusion and inclusion errors.
How to solve identification problem
- There are three proposals which meet the objective of providing a minimum basic income.
- 1) Give cash transfers to all women above the age of 20 years.
- 2) Expand the number of days provided under MGNREGA.
- 3) 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.
1) Cash transfer to all women
- One way of doing it will be to give it to all women say above the age of 20.
- 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.
- Which is 0.84 per cent of GDP.
- The cost of the scheme to the government will be less if the well-off women choose not to take the cash transfer.
2) Expanding MGNREGA
- The Act guarantees 100 days of employment.
- At present, MGNREGA is availed of only for 50 days of employment.
- One way to help the poor and informal workers is to strengthen it.
- The government needs to increase the number of days under the scheme from 100 to 150 in rural areas.
3) Employment guarantee scheme for urban areas
- Introducing Employment Guarantee Act in urban areas would help also provide income.
- Providing employment for 150 days instead of 100 days will also prove beneficial.
Some facts and figures
- In 2019-20, the government spent Rs 67,873 crore for providing 48 days of employment to 5.48 crore of rural households.
- Out of this, the wage expenditure was Rs 48,762 crore.
- The government has increased the per day wage rate from Rs 182.1 in 2019-20 to Rs 202.5 in 2020-21.
- So, the estimated expenditure for 150 days of employment to 5.48 crore households in rural areas and 2.66 crore households in urban areas — together they account for 33 per cent of total households in the country.
- The additional expenditure needed for the new proposal proposal is Rs 1.9 to 2.5 lakh crore.
- This additional expenditure is around 1 to 1.22 per cent of GDP.
- The total cost of the three proposals would be Rs 4.9 lakh crore or 2.4 per cent of GDP.
But the total cost could be lower
- As the Employment Guarantee Programme is a demand-based programme, the number of days availed could be lower.
- This is happening even now.
- Second, on cash transfers, some women, particularly from richer classes, may voluntarily drop out of the scheme.
- Alternatively, we can provide that everyone receiving cash transfer must declare that her total monthly income is less than Rs 6,000 per month.
Where the additional money will come from
- Removing all exemptions in our tax system would give enough money.
- Tax experts advocate removing exemptions so that the basic tax rate can be reduced.
- Perhaps, out of the Rs 4.2 lakh crore which is needed, Rs 1 lakh crore can come out of phasing out of some of the expenditures.
- While another Rs 3 lakh crore must come out of raising additional revenue.
- Some of the non-merit subsidies, another item of expenditure, can be eliminated.
Consider the question “What are the issues non-universal schemes faces? Suggest the ways to do with the issue of identification which such schemes face.”
Conclusion
In the post-COVID-19 situation, we need to institute schemes to provide a minimum income for the poor and vulnerable groups and trying the mixed approach of cash transfer to women and modification of Employment Guarantee Acts could do that.
