EAC-PM's report suggests scheme for urban jobless, universal basic income

The Economic Advisory Council to the Prime Minister (EAC-PM) recommended on Wednesday that the government introduce a demand-based guaranteed employment scheme for the urban unemployed on the lines of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). It also suggested a universal basic income (UBI) and the allocation of higher funds to the social sector to reduce inequality in the country. The Council noted that while wages have been growing, these are concentrated, marginalising the poor.

“Looking at the difference between the labour force participation rate in rural and urban areas, it is our understanding that the urban equivalent of schemes like MGNREGS that are demand-based and offer guaranteed employment should be introduced so that the surplus labour is rehabilitated,” a report titled ‘The State of Inequality in India’, commissioned by the EAC-PM and prepared by the Institute for Competitiveness, said. It was released by EAC-PM Chairman Bibek Debroy on Wednesday.

The report noted that raising the minimum income and introducing universal basic income are some of the recommendations that can reduce the income gap and bring in an equal distribution of earnings in the labour market.

In the Economic Survey 2016-17, Arvind Subramanian, the then chief economic advisor, had proposed to transfer an amount of Rs 7,620 per person per annum to lift the poor above the Tendulkar Committee poverty line. Extending this to three-fourths of the population would cost the exchequer roughly 4.9 per cent of the gross domestic product (GDP), he had estimated.

Later in 2019, after he stepped down from the CEA post, Subramanian had proposed a quasi-universal basic rural income (QUBRI) of Rs 18,000 per year to each rural household, except those who are “demonstrably well-off”, at an estimated cost of Rs 2.64 trillion to tackle agrarian distress. Before him, economists Pranab Bardhan and Vijay Joshi had made a case for UBI or similar schemes, but the idea was never implemented at the central level.

The latest report recommended that the government allocate “more percentage of the expenditure towards social services and the social sector”. The idea is to make the most vulnerable population resilient to sudden shocks and stop their descent into poverty, it said.

Expenditure to social welfare is pegged at Rs 51,780 crore, constituting just 1.3 per cent of total expenditure at Rs 39.4 trillion for 2022-23.

The EAC-PM pointed out that the most important aspect of measuring poverty in a multi-dimensional context requires mapping the mobility in and out of poverty.

“Therefore, it is recommended to establish air-tight slabs that make class-based distinctions clear to trace movement within a class and in and out of the class,” the report said.

Additionally, it noted, this will help define the middle-class income share and target beneficiaries of social protection schemes that constitute the lower-middle-class, lower-class, and those below the poverty line.

According to the report, while growth has taken place in terms of an increase in wages earned, the benefits of that growth have been concentrated and this has marginalised the poor further, thereby making them more deprived.

“Additionally, the income profiles have also shown the vast pay gap between men and women, calling attention to gender-based inequities in the labour market that further marginalised women and reduced their labour force participation rate,” it said.

The government should also encourage regular exercises like the Foundational Learning and Numeracy Index and Ease of Living Index for the purpose of stock taking of the extent of vulnerability among households and how to promote their overall well-being, it suggested.

Consisting of two parts – Economic Facets and Socio-Economic Manifestations – the report looks at five key areas that influence the nature and experience of inequality. These are income distribution and labour market dynamics, health, education, and household characteristics.

With inputs from PTI