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.

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