India: Minimum income guarantee could cost INR7tr

  • A minimum guaranteed income to one member each of the country’s 25% poorest households could cost over INR7tr, initial estimates by the government showed.
  • The calculation was based on a minimum wage payment of INR321 a day, translating into INR9,630 a month, mandated by the Centre for unskilled farm workers.
  • The cost was expected to be over INR5tr if 18-20% of the households were targeted, as was indicated by former finance minister P Chidambaram in interviews after his party chief Rahul Gandhi announced plans for a minimum income guarantee if voted to power in the Lok Sabha elections.
  • The Congress president had not elaborated on details of his proposal.
  • A suggestion in the Economic Survey two years ago for universal basic income, offering INR7,620 a year to 75% households could not be implemented given the cost implications and government’s inability to withdraw “subsidies” for the poor and middle class.
  • While the survey had estimated the cost at 4.9% of GDP, estimates suggested that the cost could be INR2.4tr – INR2.5tr annually if five members of the poorest 25% households were guaranteed a minimum income.
  • Offering INR3,180 a month to five members of these households could cost the government around INR1.75tr if the coverage was limited to 18-20% of the population.

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