From betting on the poor to helping the poor | The Daily Star
12:00 AM, March 31, 2019 / LAST MODIFIED: 12:38 PM, March 31, 2019

From betting on the poor to helping the poor

When it is election time, nothing pays more than populism. All parties love to woo the poorest of the poor segment of society to strengthen their welfare politics credentials. It is in this light that one has to view Congress Party President Rahul Gandhi's promise that if his party is voted back to power in the coming parliamentary polls, its government would dole out Rs 6,000 per month as minimum income guarantee to the 20 percent of India's poorest households, which in real terms is estimated to 50 million families.

The promise has been made by Rahul at a media conference well before the Congress manifesto is unveiled; the promise is going to be a key component of the poll document which is widely expected to be pro-poor with a pronounced social welfare orientation with a rights-based approach including the right to healthcare and right to land for all the homeless people belonging to backward castes and tribes. This was an approach pursued by the Congress-led United Progressive Alliance government during its decade-long rule from 2004, with Rahul's mother as the President of the Congress and the UPA. It was in January that Rahul, fresh from his party's victory over the BJP in December state assembly elections in three heartland states of Madhya Pradesh, Rajasthan and Chhattisgarh, first talked about the minimum income guarantee scheme, but its broad contours emerged only on March 25 with the staggered parliamentary polling just 18 days away.

There is no mistaking the compulsions of electoral politics behind Rahul's promise mainly for three reasons: first, Rahul wanted to build on his announcement about farm loan waiver before the polls in the three heartland states late last year, which is widely believed to have contributed to the Congress victory there; secondly, it is seen as an effort to come out of the shadow of Prime Minister Narendra Modi government's sop announcement a couple of months ago to provide an annual income support of Rs 6,000 to farmers with less than five acres of land; and thirdly, the Congress anticipates that the minimum income guarantee scheme would help wean the electoral narrative away from the national security campaign set by the BJP following the Pulwama terror attack of February 14 and Indian war planes' attack on a terror camp in Balakot in Pakistan on February 26.

It was only a matter of time that the BJP's high-octane campaign flagging the Modi government's tough-on-terror posture following the Balakot incident would lose some of its traction as India-Pakistan tensions draw down and bread-and-butter issues like employment and agriculture sector crisis return to the centre-stage of electoral discourse.  For about three weeks, the national security issue dominated the electoral campaign narrative, putting on the back burner the Congress pet planks of alleged corruption in the Rafale fighter jet deal, the farm sector crisis and joblessness. So, the Congress hopes the debate on welfare politics would restore its campaign narrative to the forefront. But it remains debatable how much the promise of a minimum income guarantee scheme could help the Congress counter the Modi dispensation's sop for the farmers, for the simple reason that while the former is just an electoral promise, the latter is already in operation.

Rahul's minimum income guarantee scheme will entail Rs 3.6 lakh crore from the government exchequer, which is estimated to be around two percent of India's Gross Domestic Product (GDP). While Rahul insists the scheme is highly implementable, critics pan it as threatening fiscal discipline and perpetuating poverty by making the poor dependent on dole-out, a criticism that Modi government's scheme for farmers had also faced. It is interesting to note that during any discussion on welfare economics, a section of economists raise hue and cry over freebies to certain segments of society in distress. It is often argued that dole-outs and loan waivers hit work and credit culture, and what needs to be done is to empower the affected sections of the population in a market economy by creating jobs and other opportunities through investments. That is fine. But what happens when that empowerment is not happening in the absence of large public and private investments? And as long as that does not happen, do not those hit by distress need the state's support to survive? Does it imply a recognition of the new reality that given the fast-changing nature of industry and technology worldwide, it may not be possible to create enough new jobs through conventional manufacturing units?  So, what is the alternative being presented to the posterity, especially to the youth? India needs to answer these questions.

A pertinent question that faces the issue of a minimum income guarantee scheme is whether there is any condition attached to it like phasing out of some of the existing subsidies relating to supply of fertiliser, cooking gas, maternity benefits, scholarships for socially and economically backward students  and power of the government aimed at specific social groups like women and farmers. According to the official Economic Survey of 2016–17, there are 950 federal government welfare schemes accounting for five percent of the GDP. Any withdrawal of these welfare schemes or pairing down of subsidies becomes politically very sensitive for any government of the day. Rahul Gandhi  has not clearly spelt that out.  The concept of minimum guaranteed income was experimented with in Brazil, an emerging economy like India, but with the condition of sending children to school. Jayati Ghosh, Professor of Economics in Jawaharlal Nehru University, opines in a newspaper article that the “fiscal costs of minimum income guarantee scheme are not as might be imagined… the maximum expenditure amounts to just under 2 percent of GDP. This is only one-third of the amount that is regularly given away as tax concessions to corporate and rich individuals.”    

Many see Rahul's minimum income guarantee in the backdrop of the idea of the universal basic income being tried out in some countries of the world including Finland. In India, the government's former Chief Economic Adviser Arvind Subramanian had started the debate on universal basic income by talking about it in the 2016-17 Economic Survey. But while the universal basic income is aimed at all sections of society, the minimum guaranteed income proposed by Rahul is not. At best, the minimum guaranteed income can help a little in reducing the burgeoning income inequality in Indian society. But its impact is likely to be limited as it keeps in mind a consumption-driven economic growth that is unlikely to have any major impact on the growth of new industrial projects. For that, large public and private investments are needed. What the poorest need in the short run is support in the form of welfare packages, and empowerment in the long run.

Pallab Bhattacharya is a special correspondent to The Daily Star.

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