India: Modi could counter Rahul Gandhi’s income scheme with UBI in Budget

  • With Rahul Gandhi throwing down the gauntlet at the ruling BJP dispensation saying that he will usher in a minimum income guarantee scheme if he comes to power, Prime Minister Narendra Modi may be compelled to roll out a Universal Basic Income scheme for the poorest of the poor.
  • With both sides of the bipolar divide getting sharpened, BJP may now have to launch a pilot project through the mechanism of the budget. While it is still not clear who the actual beneficiaries will be and what the threshold levels will be, it is clear that the government is willing to tweak its fiscal math, optics in the run up to the polls being paramount.
  • The 2016-17 Economic Survey had clearly indicated a proposed income support for the bottom 75%.
  • The question is how the government will balance its financial equilibrium given that food subsidy is close to INR1.7tr while MNREGA is an additional INR550bn. Fiscal deficit breach is unsustainable at this precise moment in our journey to achieve financial equilibrium.
  • The big question remains how many districts will form a part of this new pilot project once it is announced in the budget.
  • Equally, will it be for those people designated below the poverty line, will individuals or households be the targeted beneficiaries? And of course, most importantly, one cannot have food subsidy and UBI running in parallel, it can only be one or the other.
  • In India, a rapid expansion of direct cash transfers linked to the national biometric database and small basic income experiments has galvanized an extensive debate on a UBI.
  • Carnegie India reckons supporters’ claim that no-strings-attached payments will be an effective antidote to India’s underperforming anti-poverty programmes and leaky, distortionary subsidies.
  • Critics worry that they will undermine an already-fragile social security architecture, cause workers to drop out of the labour force and encourage wasteful spending.

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