2019 polls: Why govt should aim to create jobs, not offer basic income

Business Standard 2019 polls: Why govt should aim to create jobs, not offer basic income

For all the talk of helping the poor in the next budget, politicians would do better to make the breakthrough reforms that would create jobs

General Election 2019: During election season, which we’re entering in India, everyone likes the idea of giving voters more money. Congress Party President Rahul Gandhi, the de facto opposition leader, says his party will guarantee a minimum income for the country’s poor if victorious. Reports suggest that Prime Minister Narendra Modi’s government may compete by announcing some form of direct transfer of cash to farmers in the interim budget to be revealed on Friday, which could cost the exchequer nearly $10 billion annually.

While governments everywhere should take care of their most vulnerable citizens, the idea of guaranteeing a basic income is wrong for India right now.

Fundamentally, it would only work if two conditions were met. First, large sections of the population would have to be mired in absolute poverty. And second, all other subsidies and welfare programs for them would have to be abolished in order to free up the necessary funds without completely blowing open India’s fiscal deficit, which is already strained.

ALSO READ: Interim Budget 2019: Before polls, govt wants expansionary economic policy Neither condition prevails in India. While there’s no recent government estimate of the number of people living below the poverty line, credible research by the Brookings Institution suggests that extreme poverty in India, defined as those living on less than $2 a day, now afflicts only five percent of the population. Granted, that’s still more than 70 million people. But, for the vast majority of Indians, the challenge is no longer subsistence, it’s aspiration. No basic income guarantee will be able to address rising aspirations unless it’s a very large sum of money. At India’s level of national income, providing anything more than a subsistence income would simply be unaffordable...Read More