With Cash Handouts, India Takes Step Toward Universal Basic Income
With Cash Handouts, India Takes Step
Toward Universal Basic Income
Government
promises payouts to help hundreds of millions of small farmers
By Eric
Bellman Feb. 1, 2019 6:27 a.m. ET
NEW DELHI—India unveiled huge handouts for farmers,
setting the stage for an election-year spending spree, a possible prelude to
implementing a universal basic income in an effort to deal with widespread
poverty.
India’s budget for the year starting April 1, which was
released Friday, doubled the income at which people have to start paying taxes,
while promising payouts to help small farmers. The moves are
aimed at shoring up support for Prime Minister Narendra Modi’s party, which
hopes to retain control of the world’s largest democracy in elections scheduled
to start before May. They could also trigger a bidding war for support at the
ballot box.
The planned spending, along with previous handouts, forced
the country to miss its fiscal deficit target. It was supposed to hit 3.3%
of gross domestic product in the year ending
March, but instead will rise to 3.4% of GDP. Next year’s target is also 3.4%,
rather than around 3.1%, where it would have been without all the farm aid,
said interim Finance Minister Piyush Goyal.
“We
are moving towards realizing a new India,” Mr. Goyal said. “An India which is
clean and healthy, where everybody would have a house with universal access to
toilets, water and electricity, where farmers’ income would have doubled.”
Under the new program, the government will pay any farming
family with less than 2 hectares—around 5 acres—of land 6,000 rupees a year,
directly into their bank accounts. While the dollar equivalent of around $84
may not seem like much, in India, where the rural poor often make less than a
dollar a day, it is enough for some to live above the poverty line.
Around 120 million farming families will benefit from the
program, which would cost around $10.5 billion a year, Mr. Goyal said, as
members of parliament pounded on their desks and yelled, “hail the farmer!”
Opposition leader Rahul Gandhi, president of the Congress
party, may have been trying to beat Mr. Modi’s Bharatiya Janata Party to the
punch this week when he tweeted about a new income-support program that would
be part his party’s platform.
“We cannot build a new India while millions of our
brothers & sisters suffer the scourge of poverty,” he tweeted on Wednesday.
“If voted to power in 2019, the Congress is committed to a Minimum Income
Guarantee for every poor person, to help eradicate poverty & hunger.”
While details of how both programs would be implemented
haven’t been released, they appear to be test versions of universal basic
income plans, which are being debated around the world right now.
Universal basic income—regular government payments to
everyone that provide enough income to cover basic need—is an idea that has
been around for decades and some countries, including Canada and Finland, have
experimented with it, as well as some states in India.
The idea is to hand cash to everyone, or a specific subset
of citizens, instead of relying on traditional welfare programs. India’s
current efforts to help the poor depend largely on subsidies for food, fuel,
fertilizer and other essentials. Monitoring the massive programs is expensive
and much of the money spent on them doesn’t reach those most in need.
Universal basic income programs are supposed to circumvent
the difficult task of figuring out which people are most deserving of
government handouts. Paying directly into citizens’ bank accounts is supposed
to stop corrupt middlemen and bureaucrats from pocketing the perk.
As the election campaigns start to ramp up across the
country, analysts expect more and larger pledges of these types of programs.
“This has now become an issue of when, not if,” India will
roll out some type of universal basic income, said Milan Vaishnav, director and
senior fellow of the South Asia Program at the Carnegie Endowment for
International Peace. “I expect a UBI for India to be one of the signature
issues of the 2019 general election campaign.”
An Indian government paper in 2017 sparked discussion
about the issue by suggesting India could eventually benefit from such a
program if it were allowed to replace its many subsidies and other handouts.
“A universal Basic Income may simply be the fastest way of
reducing poverty,” the discussion paper, which came out in Jan. 2017, said. “UBI
is also, paradoxically, more feasible in a country like India where it can be
pegged at relatively low levels of income but still yield immense welfare
gains,” the report said.
For real impact, the program likely would need to be
significantly bigger than what was proposed on Friday. In the 2017 paper,
government economists calculated that to provide an income of just above $100 a
year to around 75% of Indians would be enough to slash India’s poverty levels
to less than 1% from more than 15% today.
The government economists estimated that the program would
cost almost 5% of GDP, but found the cost could be partially offset by ending
some government handouts and subsidies.
—Rajesh
Roy contributed to this article.
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