As India Jostles With Second COVID-19 Wave, It Must Introduce Minimum Basic Income Programme

As India gears up for the economic shock and human misery of its second nationwide COVID-19 wave, NITYA CHAKRABORTY makes the case for a universal income programme to be implemented to boost the economy.

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As the second wave of COVID-19 sweeps across India, it continues to further paralyze people’s lives in many states, leading to night curfews and partial or complete lockdowns in several parts of the country. The threat of prolonged lockdown is looming large if the current wave goes on intensifying. Migrant workers in industrial cities are panicking, and several have already begun heading to their home states, with many certain to follow if the situation does not improve soon.

The country faces an extraordinary situation, which needs immediate and urgent measures to protect the most vulnerable sections of our society. As it is, the poor and the unorganised sections of the labour force suffered immensely during the COVID-induced national lockdown in 2020. Presently, even if they had begun harboring cautious optimism about an upturn in their fortunes due to the supposed resurgence of the economy in the recent months, now their livelihood stands threatened again due to lockdowns and other restrictions.

The present wave is expected to decline only by the end of May, according to experts. This means that the fiscal 2021-22 will not be the turnaround year for India as was being widely projected; it will be, at best, the year to keep the economy somehow floating without major long-term damage.

The destruction of the Indian economy in 2020

The economic relief packages announced by the Union Government last year had no substantial impact on the lives of those rendered poor and jobless by the national lockdown. 

All recent studies have shown that it is the big corporates that have made the most profits in the pandemic year, both in India and abroad, while at the same time thousands have been pushed into poverty. 

In India, economic inequality, already ballooning in recent years, has widened further since the pandemic began. A recent study by the Pew Research Centre estimates that the ranks of poor in India have increased by around 7.5 crore in the last year, since the brunt of income loss and job cuts has been most borne by the lower economic classes of the population, mostly those who work in the unorganised sector. The middle class section has shrunk as well in India, as per the report.

A Centre for Monitoring Indian Economy report shows that the savings in India have increased because of the pandemic, but the consumer demand is stagnant because the majority of the population have no surplus; even those that do are cautious about demanding anything except essentials. The rich have also become selective in spending but their demand areas are limited, and that alone will not lead to the kind of steep hike that is needed at this time for pepping up the economy.

The case for  universal basic income programme in India

So what is the best course of action at this extraordinary time? All leading development economists are now talking of a minimum basic income meant for the vulnerable socio-economic sections in India. This is the only way the standard of living of a major section can be improved, and demand be generated quite rapidly having in order to positively impact the country’s economy. 

Also Read: Who must an effective social security programme in India target?

For instance, the US has a capitalist economy with a high living standard. Even there, President Biden has framed his rescue package so as to give additional income guarantee to most Americans, apart from other pro-working class measures.

At home, as usual, Prime Minister Modi’s addresses to the citizens are high on optics but low on substance. Last year, he had announced his government’s stimulus package using tall claims and ambitious promises, but with the benefit of hindsight, it is clear that his government failed to revive the economy and enhance the lives of people in either rural or urban areas.

The Union Government defied all the novel suggestions made by leading economists like Amartya Sen, Abhijit Banerjee and Raghuram Rajan, and instead opted  for a tenuous dependence on a big bank loan-based revival without taking into account the grim reality that nobody, even those who with liquid funds, is in a mood to spend. The poor and the jobless, in staggering numbers, can be made to spend, and thus boost consumption, only if liquid funds are directly made available to them, which is possible through a universal basic income (UBI).

The country’s economy was already crisis-ridden before the pandemic struck, due to a huge, largely self-created slowdown — a direct consequence of, among other reasons, demonetisation, haphazard implementation of the GST and global trade problems. The addition of the pandemic represented a double attack on the Indian economy, which needed a massive thrust to boost domestic consumption at this critical hour.

That boost cannot be achieved without injecting with funds the vast majority of the rural and urban poor classes, including those who have lost livelihoods in the last 14 months because of the countrywide lockdown, especially in India’s precarious but sprawling informal sector.

Also Read: India’s Case for Universal Basic Income

The idea of UBI has generated a rich debate in the West, especially in the USA, where the issue of income inequality has been addressed by populist leaders in both the major national political parties there. Even many American billionaire entrepreneurs have argued for UBI as not necessarily a comprehensive solution, but as at least a moderating analgesic for the severity of income inequality and poverty across the world.

The Indian National Congress (INC) had included a minimum income support programme of Rs. 6,000 per month for the people below the poverty line as a part of its 2019 Lok Sabha elections manifesto. Last year, the INC, along with 21 other opposition parties, demanded that the Union Government provide Rs. 7,500 per month to families outside the income tax bracket for six months. Today, while one could argue over the exact amount, every reasonable person can see that a UBI is needed for saving lives as also the tottering Indian economy.

PM Modi can still salvage the economy by seriously taking up and introducing the policy of a minimum basic income to help the poor, and infuse demand in the economy. His government should take cue from the moves made by several countries, including many in Asia, to help the public in a COVID-impacted economy.

For India, such a pro-people approach is needed if we aspire to build a strong nation. (IPA Service)

The article was originally published in The Leaflet.