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Why Minimum Income Guarantee?

Aashay Gune, 2019-03-20 04:31:12

Rahul Gandhi recently announced that if voted to power, his government will ensure a minimum income guarantee for the poor under a scheme called NYAY. P. Chidambaram clarified that this is not the Universal Basic Income (UBI) that many economists are discussing. A minimum income guarantee implies ensuring a basic income for the poor, whereas UBI means everyone - regardless of their income - is assured the same basic pay. Now let us see the background of this decision:


The Multidimensional Poverty Index, 2018 says that "The incidence of multidimensional poverty has almost halved between 2005-06 and 2015-16, climbing down to 27.5 per cent from 54.7 per cent. There are 271 million fewer poor people in India." Please note that these are UPA years (2004-14). ( http://www.in.undp.org/content/india/en/home/sustainable-development/successstories/MultiDimesnionalPovertyIndex.html)


Now, what is Multidimensional Poverty Index? It is developed by the 'United Nations Development Program' and uses different factors to determine poverty going beyond the income-based listing. What are these factors? Perhaps many, but principle among them - education, healthcare and standard of living.


The UPA government passed rights-based legislations 'as per inputs from the Sonia Gandhi-led National Advisory Council.' A closer look at these legislations tells us that they provided the safety nets which can help us reduce multidimensional poverty, namely the Right to Education, the Right to Food, the Right to Employment (MGNREGA) and the National Health Mission.


When we talk about poverty alleviation, we have to ensure that the family/individual should move out of the poverty cycle through these things, namely education, healthcare and income. One important indication of this happening is the doubling of school enrollments at 8th grade from 2004 to 2014 (from 11 million to 22 million, source: ASER 2017) which gives us room to assume that a family getting access to income sends its next generation to school. Now, what has happened in the near-five years of the Modi government? No change in the real wages in agriculture (source: Economic Survey, Government of India) since the past four years and loss of jobs due to foolish decisions like demonetisation. The result is acute rural distress and a probable push-back of many families below the poverty line! As school enrollments have risen, more people are demanding (and eligible) for jobs and generating jobs will be the biggest challenge in the coming decade. Add to this the job losses due to automation, and you end up staring at an even more significant problem. Moreover, decisions like demonetisation and a badly-implemented GST have destroyed small and medium-scale industries which are otherwise job creators.


As the country stares at the risk of an increase in the number of its poor, it will become a priority for the government to ensure the rise in income of the poor. The announcement by Rahul is therefore essential, and if the Congress is voted back to power, 'income' will be an additional safety net to alleviate poverty in the coming decade along with the other safety nets of education and healthcare. Perhaps this is also needed because the safety net of employment might not be very useful in the coming years, as it is already tampered because of loss of jobs due to decisions like demonetisation and GST.


Category: Economy

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