Arvind Subramanian, colleagues propose Rs 18,000 basic income

A per-household annual transfer of about Rs 18,000, or Rs 1,500 per month, encompassing 75 per cent of the rural population, 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), he says in a paper that he co-authored with Director of JH Consulting Josh Felman, World Bank Economist Boban Paul and Harvard University’s PhD student MR Sharan.

The paper titled “Quasi-Universal Basic Rural Income (QUBRI): The Way Forward” suggests that the burden should be shared between the Central and state governments in equal measure.

The proposal comes days ahead of the interim Budget in which an announcement of Direct Benefit Transfer (DBT)scheme for farmers is widely anticipated.

It says the opportunity created by agrarian stress can be leveraged to build the pillars of a new economic India in which inclusion, facilitated via some variant of a quasi-universal basic income, is centre-stage.

Targeting an inflation-adjusted basic rural income of Rs 18,000 per household, Subramanian and his co-authors suggest that the Centre should offer to finance one-third of it or Rs 6,000 upfront and without conditions, while the rest Rs 3,000 should be financed in the form of untying existing grants given to finance Centrally-sponsored schemes.

However, they warn that the scheme should not be financed from RBI resources or by the states or the Centre breaching their existing fiscal commitments.

They say 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 like interest rate subsidy for crop loans (Rs 15,000 crore), Fasal Bima Yojana (Rs 11,000 crore), additional MSP or price deficiency scheme (Rs 10,000 crore) and fertiliser subsidy (Rs 70,000 crore).

However, they add that the fertiliser subsidy should be phased out gradually over three years. The paper says that the Centre’s additional Rs 3,000 contribution could be met by the Centre and states pruning about 15 per cent of the overall Centrally-sponsored schemes budget.