Can India Really Guarantee a Minimum Income?

Elections to the central government are due in India in 2019. This is the reason why all political parties have suddenly become very concerned about the economic welfare of the poor people in the country. This is the reason why different political parties are proposing different measures in order to tackle this poverty. One of the measures being proposed by the opposition is the idea of a Minimum Income Guarantee scheme. A minimum guarantee scheme means that the government will provide an unconditional basic income to all citizens of a country so that they are able to fulfil their basic needs and live a dignified life.

It needs to be understood that the minimum income guarantee is not really an idea which is unique to India. Instead, this idea has been proposed in various nations of the world. In some places, it has already been tried out. In other countries, it is known as universal basic income. This idea has basically taken root because of the rising unemployment in many western countries which is being caused by automation.

It also needs to be noted that the idea of a minimum income has its fair set of challenges. It has not been easy to implement this scheme in the developed western nations. Hence, it will definitely not be easy to implement the same in a developing country like India.

The challenges related to minimum income guarantee have been listed down in this article.

Fiscal Problems: The Indian fiscal situation is grim. The government already forms a huge part of the economy. The bigger problem is that the government has been rapidly borrowing money in order to pay its bills. The recent populist budget has also extended many tax waivers and made the situation worse for the government. The fact of the matter is that the government itself does not have any money to transfer to the poor. Hence, it would have to resort to borrowing more money. Borrowing isn’t a viable option since it would exacerbate the already severe fiscal situation. It would, therefore, be fair to say that the government of India can only afford a minimum income if its cuts some subsidies which are already in place.

Political Suicide: There are many ineffective subsidies such as the public distribution system which are still present in India. Ideally, if the government were to cut expenses on these ineffective subsidies, it could make room for paying a minimum income. The problem is that cutting back any kind of subsidy is akin to political suicide. This is because any politician that makes the rational decision to replace an ineffective subsidy with an effective one will be seen as anti-poor. Hence, removing even one subsidy is difficult whereas the implementation of minimum income would require the government to do away with a lot of subsidies. Hence, implantation is nearly impossible given the political consequences of such an action.

Social Disruption: One of the main problems with the minimum income guarantee scheme is deciding who the beneficiaries should be. For instance, if the benefits are given to every family, it may result in uneven distribution. Some families have more people than others. Hence, if one family has only two people whereas others have five people, the per capita income will be greater for the first family.

On the other hand, if the income is paid on a per-person basis, families with more people will benefit as compared to smaller families. This would be a contradiction since the government of India has been advocating a small family size for a very long time.

Also, the bigger problem is that in India, certain communities tend to have a bigger family size than others. As a result, the minimum guarantee scheme will soon take a communal colour. Critics have been arguing that the minimum income scheme will end up creating a lot of social unrest.

Leakages: The actual distribution of the benefits to the needy and the poor will also be a big problem in the Indian context. This is because, in the western world, the distribution happens via bank accounts and unique numbers such as the social security number.

However, in India, the banking infrastructure is incredibly poor. This means that there is no way to send cash directly to the affected people. Also, many poor people do not have Aadhar cards. Once again, this makes it difficult to identify whether the benefits are actually being given out to impacted people.

On the other hand, if the past record is considered, there is a good likelihood that the money earmarked for the minimum income guarantee scheme will be usurped by corrupt politicians.

Identification Problems: Lastly, identifying the poor people in India is not going to be an easy task. There is no credible data available in India which will help the government identify the income group that needs to be targeted. Also, this data is old and may get updated every year. Hence, maintaining the data and adjusting the minimum income accordingly will also be a huge administrative task. No matter, which method of identifying poor people is used, there are some who are likely to get left out. Given India’s huge population, this number is likely to be in the millions.

To sum it up, the minimum income guarantee scheme seems more like election rhetoric which is meant to garner votes. This is because the actual implementation of such a scheme is going to be very difficult.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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