Budget 2017: Government planning national social security system for poor, unemployed

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NEW DELHI: The government is considering an ambitious income transfer scheme that could form the basis of a national social security system though opinion is divided over whether it should be a universal basic income or more focused support limited to the most vulnerable.

The idea is being discussed as a means of addressing poverty and if a decision is reached, it could be announced in the February 1 budget by FM Arun Jaitley.

“There is a thinking… pros and cons of having such a scheme are being examined,” said a government official. Such a programme can have broad implications in terms of delivery as well as the fiscal deficit, said the official, adding that any decision will have to be taken keeping these factors in mind.

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Providing Rs 1,500 a month to an estimated 200 million poor will cost the government about Rs 3 lakh crore, resources that may be difficult to come by. The debate is between a widely accessible universal basic income that may stretch the social security net too thin and targeting specific groups.

The government is committed to lowering the fiscal deficit to 3 per cent of GDP in FY18 though a committee is reviewing that road map. However, if resource generation rises in the wake of demonetisation and the upcoming rollout of the goods and services tax (GST), the government may be in a good position to back such a scheme.

Also Read: All you need to know about upcoming Union Budget

The target group is said to include unemployed people with no source of income. One idea is to put the money in the hands of the woman of the household so that funds are better utilised.

Some policymakers are confident that Pradhan Mantri Jan Dhan Yojana accounts and the Socio-Economic and Caste Census of 2011 will facilitate a targeted scheme if a universal basic income cannot be provided.

The idea has been gaining ground across the world. Finland recently announced a basic income scheme for anyone seeking employment.

The UK government offers a jobseeker’s allowance for the unemployed. Jammu & Kashmir became the first Indian state to commit to the idea of a universal basic income during its budget presentation last week.

Chief economic adviser Arvind Subramanian has said a universal basic income scheme can help address poverty, though implementing such a programme will be challenging. “People are dragged into poverty due to droughts, declining agriculture opportunities, disease and so on,” he said in October. “So the safety net provided by the government should be quite wide and that’s why this UBI (universal basic income) has some merit.”

The Economic Survey for the current fiscal year that will be released on January 31, at the start of the budget session, is likely to discuss the issue. Cost implications could limit its scope.

“My personal view is in favour of targeted instead of universal transfers,” Niti Aayog vice-chairman Arvind Panagariya told ET in an interview last month. “With the Socio-Economic and Caste Census, we have a pretty good idea of who the poor are. So we can use the limited fiscal resources more effectively to combat poverty… I lean in favour of a strategy that places a larger volume of cash in the pockets of the poor than the one that gives cash to everyone in smaller amounts.”