In order to tackle agrarian distress effectively, the Central government and the states should launch a basic income scheme which guarantees minimum cash transfers to all except the well-off in rural areas, former Chief Economic Adviser Arvind Subramanian said. Terming it as the Quasi-universal basic rural income (QUBRI) scheme, he said it should not be funded out of the reserves of Reserve Bank of India but through replacement of existing farm and fertilizer subsidies.
Illustratively, an annual transfer of about Rs 18,000 or Rs 1,500 per month per household would cover 75 per cent of the rural population at a total fiscal cost of about 1.3 percent of Gross Domestic Product or Rs 2.64 lakh crore in 2019-20 prices, Subramanian, currently a visiting lecturer at Harvard University, said an article.
The Socio-Economic Caste Census should be used to identify the rural poor. Total number of rural bank accounts is about 64 crore, ensuring wide or nearly comprehensive coverage for QUBRI.
“There should be a direct cash transfer (in fact the same cash transfer) only to rural households…Although the crisis is agrarian, this has depressed the entire rural economy; so making the focus rural might be more effective at addressing the agrarian stress. Second, the transfer would not be to all rural households but all except the demonstrably well-off. This would make it not universal but quasi-universal,” he said in the article written with three co-authors Josh Felman, Boban Paul and M R Sharan.
The QUBRI scheme should ideally be funded equally by the Centre and the states through cutting down of existing farm subsidies and pruning Centrally Sponsored Schemes. “But QUBRI should not be financed: from RBI resources not least because they are one-time and cannot finance a permanent QUBRI entitlement, and by the states or center breaching their existing fiscal commitments,” the article said. QUBRI scheme would be better than Telangana’s Rythu Bandhu initiative and Odisha’s Kalia scheme, as it will be progressive and go further in including non-farm rural households.
Such a scheme would be better than loan waivers given by the government will are essentially regressive as they mainly benefit rich farmers. Subramanian’s suggestions come days ahead of the Budget to be presented on February 1. Incidentally, Congress President Rahul Gandhi said his party will bring Minimum Income Guarantee for every poor person if voted to power.