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Basic Rural Income Can Be Funded by Scrapping Dysfunctional Schemes Like Pradhan Mantri Fasal Bima Yojana: Former CEA Arvind Subramanian

A paper co-authored by Subramanian has proposed a basic income of Rs 18,000 per year  for each rural household.

Congress President Rahul Gandhi recently announced that his party is “committed to a Minimum Income Guarantee for every poor person”. Former Chief Economic Adviser Arvind Subramanian, on similar lines, has reportedly proposed a Quasi-Universal Basic Rural Income in his recent paper.

Subramanian, along with Josh Felman (Director of JH Consulting), Boban Paul (World Bank Economist) and MR Sharan (Harvard University’s PhD student), has authored a paper that proposes an alternative to build a new rural India where a basic income, regardless of agricultural vagaries, will be guaranteed. In the paper titled, “Quasi-Universal Basic Rural Income (QUBRI): The Way Forward,” Subramanian, proposes that this basic rural income of Rs 18,000 per year should be available to every rural household, except those that are “demonstrably well-off”, reported Business Standard.

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“Current schemes are highly regressive, helping the poorest very little. Loan waivers would benefit rich farmers because very few poor farmers (less than 15 per cent) borrow from official sources, and on average, rich farmers borrow four times as much as poorer ones (Rs 1,40,000 per household versus Rs 40,000),” the paper mentioned.

There would be a direct cash transfer to rural households, the paper stated, adding that although the crisis is agrarian, the rural economy is depressed, “justifying the broader, rural focus”. It further mentioned that the transfer would not cover all rural households but all except the demonstrably well-off based on the rural Socio-Economic Caste Census (SECC). Even with broad coverage, the paper stated that the transfer would be meaningful enough to make it “basic.”

At Rs 18,000 per annum — or Rs 1,500 per month — the QUBRI can be covered at a total fiscal cost of about 1.3 per cent of the GDP, or Rs 2.64 lakh crore (at 2019-20 prices), Subramanian and the others noted, adding that the burden should be shared between the Central and state governments in equal measure. “If the centre finances the entire am­ount, there would be a serious moral hazard and lack of effort on the part of some states: they must have some skin-in-the-game. If the states were to finance most of it that could be unfair to the poorer states. That is why we propose a 50-50 burden-sharing rule below which seems a reasonable trade-off between equity and incentives.”

They added, however, that QUBRI should not be financed (1) from RBI resources, not least because they are one-time and cannot fund a permanent QUBRI entitlement, and (2) by the states or the Centre breaching their existing fiscal commitments.

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The paper noted that the Centre’s Rs 6,000 per household contribution would entail an expenditure of Rs 84,000 crore, which could be raised by eliminating or phasing out “demanding, duplicative, and dysfunctional” agricultural schemes — interest rate subsidy for crop loans (Rs 15,000 crore); Pradhan Mantri Fasal Bima Yojana (Rs 11,000 crore); additional MSP/price deficiency scheme (Rs 10,000 crore); fertiliser subsidy (Rs 70,000 crore).

In the paper, Subramanian and the other authors termed Telangana’s Rythu Bandhu — a welfare program to support farmer’s investment for two crops a year by the Government of Telangana — and Odisha’s Krushak Assistance for Livelihood and Income Generation (KALIA) scheme as laudable initiatives, but claimed that the QUBRI would be more far-reaching and progressive. The big advantage of QUBRI over Kalia and Rythu Bandhu, the paper noted, is implementation. “Under these two schemes, all farmers — landed, tenants and workers — would have to be identified. This could be a nightmare. The QUBRI would use the SECC not to target and include beneficiaries but to exclude non-beneficiaries, those that, by way of owning certain assets, are clearly non-poor.”

The paper concluded that agrarian crisis has created an opportunity to initiate discussions on a real social safety net for rural India, a QUBRI. “It should not be a substitute for government efforts to improve human capital (health and education) nor should it replace existing elements of the social safety net such as old age pensions and maternity benefits,” it mentioned, adding that QUBRI should also be monitored for its potential dis-incentivising impact on urbanisation, rural-urban migration and agricultural land consolidation.

“The time and opportunity are now,”Subramanian underlined in the paper.

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