Universal basic income

By Prabhudatta Misra

While the Centre is weighing the pros and cons of a universal basic income scheme for the poor akin to Telangana’s Rythu Bandhu policy, Odisha and Jharkhand have come out with their variants of such largesse. Ahead of state assembly as well as general elections by May, Odisha has announced an annual succour of Rs 10,000/acre for its farmers for three years (2019-2021), higher than the Rs 8,000/acre provided by Telangana. The scheme’s cost is estimated at Rs 10,000 crore over three years.

Under its Mukhya Mantri Krishi Yojana, the Jharkhand government will pay Rs 5,000/acre every year to the state’s 22.76 lakh small and marginal farmers, at an estimated annual cost of Rs 2,250-crore, starting April 2019.

FE has estimated that for the same level of support to farmers (Rs 8,000 an acre a year) as under Telangana’s scheme, the pan-India cost, given the net sowing area of 140 million hectares, could be over Rs 2.75 lakh crore a year.

Telangana is paying the assistance to all farmers on the basis of land records irrespective of rich or poor. Under Odisha’s KALIA scheme, small and marginal farmers (estimated at about 30 lakh) will be paid Rs 5,000 per acre every season for the next five crop seasons starting Kharif 2019.

As the political pressure mounts on the NDA government, analysts are expecting a hosts of decisions to support farmers before the next general elections scheduled for May 2019. A Rythu Bandhu-type scheme is under consideration by the Centre but non-completion of digitisation of land records could make it impossible to implement it in many states.

Meanwhile, there has also been a demand within the BJP to roll out a universal support scheme for the poor. On Monday, BJP MP Nishikant Dubey said in the Lok Sabha that the government should transfer Rs 3,000/month to bank accounts of each of the 10 crore poor families.

Former chief economic adviser Arvind Subramanian wrote in FE a few months ago, “More generally, QUBIs (quasi universal basic income) are schemes in which transfers are given to everyone who meets an easily identifiable criterion.” He, however, added that since payments to households under the Rythu Bandhu scheme are based on farm size, they can become regressive (hence the pressures to exclude large farmers from the scheme). “In contrast, a pure UBI in which the same rupee amount is given to all households will be progressive because the effective subsidy rate (transfers as a share of household income) will be greater for the poor and decline with rising income,” he said.