A person holds a one hundred rupee note in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

This Income Scheme Era Needs New Measure Of ‘Poor’


A basic income scheme has been talked about for a long time and was proposed by Arvind Subramanian, then Chief Economic Adviser, in more recent times in the Economic Survey. This is an invited article on the practicality of the idea, since it is being literally catapulted in a seesaw manner by political parties. Income transfer is direct and is seen as an advance from a calorie or expenditure based scheme which has been described as the Official Poverty Line or Alagh Poverty Line.

The sequence of preparing these estimates was to start with physical quantities of per-person consumption of food articles. Using the calorie count of each commodity consumed, and adding up for all commoditties consumed in the reference period of a week, the deficiency from a recommended total requirement was worked out. Persons with deficient consumption were ‘poor’. Originally developed in the ship-to-mouth days of the mid-1970s, it was, in my mind outdated, by the late-eighties.

But later committees did not shelve the basic structure.

Once the spread of persons listed by calorie consumption, as just explained, was available; it could be cut in different ways. This is what subsequent committees did, superimposing some additional criteria like access to health or educational opportunities and developing deprivation numbers.

The DT Lakdawala Committee updated the calculations. The Suresh Tendulkar Committee only added some other basic needs and equated the rural and urban cut-offs, for unknown reasons. C Rangarajan still used the workforce proportions of the 1970s-OPL base. That led to havoc because the labor force proportions had changed substantially, as I showed in a review article.

This kind of calorie consumption profile or one tempered with additional deprivations is the method the different committees followed. In this policy literature, there were also suggestions that data emanating from the Socio-Economic Census could be used as an alternative, since it was more comprehensive than food intake. But there were messy problems of giving weights to different variables in the census numbers. Also keeping the data up to date was expensive. So that data set is not a favourite.

I kept on wistfully asking for a new paradigm. The basic income scheme demands that, but that issue is brushed under the carpet.

So the only possible way to begin is to have a rough and ready ‘Compendium of Poor Person Categories’: say four, ‘just poor’, ‘poor’, ‘very poor’ and ‘destitute’.

The basic income supplement that each family would get could vary inversely with the categories. Say, Rs 1,500 per month for the just poor to Rs 6,000 for the destitute. Once the scheme is implemented, its obvious angularities would come out and some improvements on the basic income scheme would emerge. But in an economy where less than a quarter of the income is monetised in the banking system, the leakages would be heavy and more than, say, a grain subsidy, because it is easier to siphon away cash.

Is there a better way? Not that I know of, unless in a way that the implementation cost is prohibitive, with ‘inspectors’. That would be throwing the baby out with the bathwater, because the attraction of the basic income scheme is its apparent deceptive simplicity. It is however not unlikely that the scheme will be an election give away and concerns (Arvind Subramanian’s, ours, and those of other like-minded persons) will remain of an academic nature.

While it is good to raise business-like questions on the basic income scheme, we are in a dog-eat-dog pattern of recent Indian politics. When I do MGNREGA or basic income transfer its good; when you do it, it is crooked. But in a vibrant democracy, there is no going back on such initiatives. The scheme, the government says, is bad when Rahul Gandhi announces it, but they thought it up and it’s good when they implement it. Well, we will get used to it and, hopefully, Gresham’s Law won’t work in politics, with good politics driving out the bad.

Yoginder K Alagh is an economist, who defined the first poverty line in India and was later Union Minster for Planning and Programme Implementation.

The views expressed here are those of the author and do not necessarily represent the views of Bloomberg Quint or its editorial team.