Monday, Dec 05, 2022

Why income transfers are not enough

An urban employment guarantee programme is an idea whose time has come.

All poverty lists of governments so far have been ridden with fatal flaws. (Illustration by CR Sasikumar)

Temperatures are rapidly warming up in what promises to be a blistering summer of India’s electioneering. Amidst the belligerent grandstanding on national security and the communal messaging barely below the surface, Rahul Gandhi’s announcement of a minimum income guarantee scheme came as a relief, if only because it tried to steer the public discussions to the struggles of India’s poorest people to survive with dignity. It is perhaps telling that even for this, Rahul Gandhi felt compelled to use a military metaphor: Of a surgical strike.

The details of the proposed programme are unclear on many points. A literal interpretation of the announcement is that it will be a monetary top-up, designed to ensure that each family takes home at least Rs 20,000 every month. This seems patently impossible to implement, because it would require accurate estimation of the incomes of every household, which is impossible to do with any kind of objectivity for the large mass of households whose earners are not in formal salaried employment. This is even more difficult for households dependent on casual work, or self-employment in farms or small businesses.

But when the details of the proposed minimum income guarantee scheme were fleshed out by Congress spokespersons, it seemed that the main intention is to identify the country’s poorest households who comprise the bottom 20 per cent of the country’s population, into whose accounts the government, if elected, would transfer Rs 6,000 every month.

There are obvious implementation difficulties with this formulation as well. These relate, most of all, to how the poorest households can be identified with any kind of objectivity and certainty. All poverty lists of governments so far have been ridden with fatal flaws. Even Planning Commission studies have demonstrated that if you are poor, the chances are more that you will not be included in an official list of the poor, than included. The reason for this universal experience of intensely flawed official poverty lists is that there are no objective and verifiable criteria by which the monetary income of a household in the informal sector can be measured. These lists, therefore, inevitably become dependent on the discretion of officials and politicians at the local level. Since the stakes — for inclusion in these lists — are so high, this can easily encourage rent-seeking and power-brokering.

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The other major worry is of how will it be financed. If the party clarifies that this will be by taxing the rich (especially the super-rich), through wealth and inheritance taxes, or by cutting subsidies or tax holidays to the rich and super-rich, it would be a welcome move. But, some announcements speak worryingly of the “rationalisation” of subsidies to release the funds required for this income transfer. If this means that existing subsidies for the poor, such as through the Public Distribution System (PDS), would be reduced in order to finance this income transfer, it would be disastrous for the poor, because it would not amount to an addition to their incomes.

However, my most fundamental worry about this proposal, or indeed about any proposal for income transfers is that they in effect supersede the most fundamental way of assisting most households to overcome their poverty. This is through the assurance of respectable, well-protected and decently-paid work.

My worry is, essentially what the growing support for income transfers — even in neo-liberal institutions like the World Bank — signal, without admitting it, is that the present economic growth model has the potential to create wealth, but not jobs. The mounting evidence of jobless growth in surging economies like India is not acknowledged to be a fatal flaw of this growth model. The central promise of the market reforms was that freeing the economy for global private capital would spur millions of jobs, so everyone would be better off even if wealth inequality grew on a quantum scale. Since we have seen, in the past decades of high growth, that these have not expanded decent work opportunities, the authentic and logical remedy would be to search for a new growth model: One not dependent on a trickle-down, but one that bubbles up from below, by ensuring small amounts of more resources in the hands of all people. Instead of this reimagination of growth, from below rather than above, the growing recommendation is to retain the globalised market model, and enable the millions who would continue to be without decent work, to live on income transfers.


India in the first decade of this century has demonstrated the power and impact on poverty of a very different kind of social protection programme, which is of social protection through the guarantee of work, instead of just income transfers. Where it was implemented in spirit, it allowed families to earn enough to rise above poverty, and even save some money to spend in the local markets (further spurring growth, and therefore, jobs). At the same time, it created rural assets such as local irrigation and roads, which would help further raise employment in a virtuous cycle.

Therefore, the resolve to assist the poorest families with redistributive measures to escape poverty is a worthy goal in a country of growing massive and morally reprehensible levels of inequality. The best way to do this is not through income transfers, but by guaranteeing work to all who seek it, where they seek it. This would be served most effectively by creating an urban employment guarantee programme, an idea for which the time has come. This would assure employment in extending basic public services for low-income urban settlements, as well as a massive expansion of the care economy, in terms of services for children, persons with disabilities and the aged.

This does not mean that there should be no income transfers. There are populations that are restrained from any or equal participation in work, such as older people, persons with disability and single women. For them, cash transfers equivalent to at least half the minimum wage is imperative to help them live outside poverty. Farmers, sharecroppers and farm workers, too, require a carefully designed income support programme.


The time indeed has come for an end to poverty by redistributive measures. India has the wealth and the state capacities to end the suffering of hunger and want. What it needs is the social imagination, the political will, and, above all, public compassion.

Mander is a human rights worker and writer

First published on: 12-04-2019 at 12:12:11 am
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