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How much Minimum Income Guarantee Scheme is practical?

All parties in the election season are engaged in using various gimmicks to get votes. In this connection, Congress President Rahul Gandhi has announced a scheme on March 25, 2019. According to this, after coming into power in the Centre, the Congress-led government will give Rs 6,000 monthly or 72 thousand rupees annually to every poor family. As per assumption, about 5 crore poor families or 25 crores poor people of this country will get financial relief. This number has been based on the presumption that at least five members will be in a family. It has been named the Minimum Income Guarantee Scheme, which will cost around 36 trillion rupees every year. The benefit of this scheme will be given to those beneficiaries who will have Rs 12,000 income per month. This financial assistance will be directly credited to the beneficiaries account. As per Gandhi, this scheme will be implemented in a phased manner. Rahul Gandhi also said that the strategy of implementation of this scheme has been finalised after discussion with eminent economists.

Why is Minimum Income Guarantee Scheme important

Even after 72 years of independence, poverty has not been removed from the country. According to the report of the Suresh Tendulkar committee, 21.9 per cent of the total population or 27 crore people were living below the poverty line in the Financial Year 2011-12. After elapse of 72 years of independence too, the situation is more or less the same. Former prime minister Indira Gandhi had also given slogan of “Garibi Hatao”, but expected results could not have come out. The Economic Survey Report for the financial year 2016-17 was published on January 31, 2017, in which the minimum income guarantee scheme was mentioned as a remedy for poverty reduction. Economists like Standing and Pranav Kumar Vardhan supported this concept by saying that all the citizens in a corrupt and socially backward country like India should be given a certain amount for their livelihood.

Advantage of scheme

Cash transfer in the accounts will certainly increase the family income. Supporters of this concept believe that poverty can be reduced with the help of this remedy. It is assumed that cash transfers in accounts will change the social and economic condition of the workers. To get the benefit of this scheme, people will also be motivated to open accounts in the Banks. It is worth mentioning that around 30 crore accounts have been opened under the Prime Minister’s Jan Dhan scheme, but the situation of financial inclusion will be further better with this exercise, thereby the demand and supply flow will increase. In this connection, two studies have been conducted in Madhya Pradesh and Delhi. The studies were done in collaboration with the Self-employed Women’s Committee (SEWA) in Delhi and Madhya Pradesh. The SEWA has been active for a long time for supporting poor people to come out from poverty. This study has been done in the calendar year of 2011.

Under these two studies, 100 families were given Rs 1,000 per month. As a result, it was seen that the beneficiary family deposited the amount in the bank in the name of the woman member, which was used when needed.

In 2015, Banerjee, Hannah, Crandler, and Olcan had studied the effect of government cash transfer schemes on supply of labour in six developing countries like Honduras, Morocco, Mexico, Philippines, Indonesia, and Nicaragua, and in their studies, they found that its impact was not negative on the supply of labourer.

It is also being said that this scheme will be upgraded to the status of the poor socially and economically. This will also minimise the level of corruption and will play the main role in removing the involvement of intermediaries in such schemes.

Disadvantage of the scheme

According to some economists, the availability of free money makes people lazy and the beneficiary doesn’t want to do work. Workers, who are working will also not taking interest in working, which will reduce labour supply. Receiving free money will develop bad habits. In the male members of the house, the tendency of intoxicant and gambling can flourish, because, in our country, there are still a large number of men connected with Banks. Therefore, the claim of the Congress Party to giving the benefits of this proposed scheme to women is totally illogical. For this, first of all, women will have to open accounts in the banks.

Implementation of this scheme will increase the pressure of work on banks. The Indian banking sector is already facing a shortage of human resources. This will also increase the pressure on the banks’ servers, which will require a lot of capital to update and buy new technology. Identifying the beneficiaries will be a difficult task for the government. In this process, the pace of corruption will increase. Ineligible persons can also be successful in taking advantage of this scheme. The cost of the proposed scheme will be Rs 36 trillion, but Rahul Gandhi has not disclosed the ways through which the Congress party will arrange such a big amount.

Conclusion

Some economists are talking about the success of this scheme. A few studies have been done in this regard, but such studies have been done on a limited number of people or in small countries. It cannot implement in a large country like India. In order to implement the scheme in India, Rs 36 trillion will be needed every year, for which the existing government schemes like MGNREGA, Public Distribution System, etc. will have to be closed. If this is done, then there will be an atmosphere of distrust among the people. In this regard, the possibility of misuse of money cannot be negated. The problem will also be in identifying the beneficiaries. In India, the volume of illiteracy and poverty is very broad. Hence, the illiterate people of the country can start to understand the benefits of this scheme as their right, which will have a negative impact on the country’s workforce.

Due to a decrease in the labor force, the biggest loss will be on the economy. The pace of manufacturing of various products will be reduced, causing an imbalance between demand and supply. This will also impact negatively on the development process of the country.

 

By Satish Singh


Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of AFTERNOON VOICE and AFTERNOON VOICE does not assume any responsibility or liability for the same.

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