Shielding poor by taxing rich Provision of food security through universalization of PDS and designing of safety-net schemes

people availed of it in 2020 compared to last year, the shortfall in funds allocated for the scheme is a major worry. 45.6 lakh households that applied for a job card were not issued one this year71 because of the budget constraint. There are also significant state-wise variations in the way MNREGA has performed through the past year. For example, in Jharkhand and Uttar Pradesh, the percentage of households whose demand for MNREGA work was unmet at some point of the year was 25 percent and 23 percent respectively. On the other hand, West Bengal and Rajasthan did better on this front, and the corresponding figures for the two states were 7 percent and 8 percent respectively. Nationwide, 13 percent of households found their demand for work unmet at some point during the year.

This situation calls for large-scale opening of NREGA works on a proactive basis. Every village needs at least one major worksite, where a good number of people can work at short notice (with adequate distancing precautions). Given the plight of migrant labour and the long -term effects of corona pandemic on the rural economy, time has also to come to reimagine NREGA as universal basic income guarantee scheme. Linking MGNREGA with direct-cash transfer has the potential to mitigate economic hardship of landless labour, small-marginal farmers, and seasonal migrants in India. Experts72 recommend to consider a return to cash payment of NREGA wages, at least as an option for the duration of the crisis. This would help to ensure timely and reliable payment of wages. As suggested by leading development economist Pranab Bardhan, a modest amount of Rs 16000 per year direct cash transfer to a household of five would be sufficient. According to another expert, transferring half of the last year’s wages of MGNREGS workers as advance into their accounts would also alleviate their suffering from economic crisis.73 In short, with a monthly basic income support combined with 100 days of legally guaranteed rural works, NREGA would help ameliorate the plight of elderly, widowed, and disabled in rural India and also obviate the need for multiple conflicting income support schemes for farmers in rural India.74

Shielding poor by taxing rich

Despite resuming of economic activities post lock down, different section of population including informal sector workers as well as many of the middle class workers faced unemployment or loss of wage. Centre for Monitoring Indian Economy data, for instance, finds75 that the proportion of households who said that their finances were worse compared to a year ago has risen to 45% in the first fortnight of April 2020 from 8%-9% in January and

71 MNREGA during COVID-19 pandemic: More households got work in 2020, but fund crunch a major concern, finds study; Neerad Pandharipande; December 31, 2020 72 Jean Drèze ; MAY 25, 2020; “The need for a million worksites now”; (web: https://www.thehindu.com/opinion/lead/the-need-for-a-million-worksites-now/article31665949.ece) 73 T M Thomas Isaac, MAY 19 2020; “Package of numbers, not relief” 74 The Times of India; Ashwani Kumar; May 28, 2020; “Reviving and reforming MGNREGA” (web: https://timesofindia.indiatimes.com/blogs/voices/reviving-and-reforming-mgnrega/) 75 Modi’s ‘atmanirbhar’ plan does little to help those worst hit by lockdown; Dipa Sinha; May 19, 2020

February. Further, they find that the unemployment rate was as high as 27% in the week ending on May 3 and 114 million jobs were lost in April, with small traders and wage labourers bearing most of the brunt.

To revive economy, one of the way for the Government is to take innovative measure to augment tax revenue. However, charging indirect taxes on the commodities would have adverse effect of the already suffering section of poor population by reducing the consumption demand which in turn would hamper in reviving the economy. However, studies76 suggest that, the government can help the most underprivileged of its citizens by investing in them and keeping their needs in mind instead of just looking out for a handful of rich people by abolishing tax. Oxfam’s annual report on inequality says that India has performed poorly in this year’s report with 1% of India’s richest population having four times more wealth than 70% of the country’s poorest. Hence, according to the experts, a trio of wealth tax, inheritance tax and higher income tax could hold the key to solving India’s inequality issue. More tax revenue can be generated by levying higher income tax from the citizens who have ability to pay taxes.

Similarly, the government can re-introduce the wealth tax which has been demolished earlier to increase tax revenue of the country which would be helpful in reducing the income inequalities as well as the surplus revenue would help in investing in social welfare scheme for the needy. The IMF’s Fiscal Monitor shows that raising taxes for higher earners is an effective way of reducing inequality without having any adverse impact on economic growth.77

Another way to augment tax revenue is to re-introduce the inheritance tax by India Government. Wealth held by billionaires in India arises from three major sources –inheritance, self-made, and inherited and growing. Inheritance tax is vital to prevent excessive concentrations of wealth and power in the hands of a few and to ensure greater equality of opportunity across generations by reducing the amount of wealth that can be handed down through families. Countries such as Chile and South Africa have raised taxes on corporations and wealthy individuals generating millions of dollars to invest in vital public services.78

Provision of food security through universalization of PDS and designing of safety-net schemes

While overall, India had few choices other than some version of a lockdown, a poorly planned and executed lockdown has created a serious humanitarian problem. Most Indians work in the informal sector, and India has 275 million persons who live below the poverty line of $1.25 a day (approximately 3,000 rupees per month). The most important component of the

76 Government of India is under taxing big corporates and billionaires; SEP 28, 2020 77 ibid 78 ibid

stimulus and relief package was the provision of 10 kilograms of food grain and 1 kilogram of lentils per person per month under the public distribution system (PDS). The main problem was that many of the families lacked “ration card” required to access the local PDS ration store. In this situation, the viable recommendation was that Union and state governments should suspend the requirement of a ration card and accept any valid ID to distribute the inkind transfer. About 850 million Indians have voter identification cards, and more than a billion have the biometrically linked AADHAAR card. Both are good substitutes for the ration card to provide immediate relief.79 Also, Centre must release extra quantities of Food Corporation of India's foodgrain stocks to States at zero or nominal rates. As per the present statistics, 86 per cent of vulnerable households are receiving PDS ration and leaves behind around 500 million people, many of whom are very poor(CBGA, 2020). Universalization PDS will include these excluded families with extra stock of food grains released by the Centre.

In times of distress, inability of a working member to earn is a common cause of impoverishment. Some steps have been taken in the past to ensure financial inclusion and risk insurance, but we do not have one for basic sustenance during a disaster—targeting the millions of poor who need it the most. India has been successful in vastly reducing the number of the poor living in extreme poverty. However, the pandemic is threatening to unravel the gains and add another 176 million to the poor category. Governments can influence factors affecting stunting and hunger by adopting policy measures of increasing incomes of the poor through a cash transfer programme, and by promoting dietary diversity in agriculture, i.e. include safety net schemes (short term) and agricultural interventions (long term). Specific safety-net schemes can be designed to support the needy (BPL/AAY category) during periods of extreme emergencies. It is primarily a Direct Benefit Transfer to assist the destitute and protect the vulnerable, to tackle the three challenges imposed on PDS—affordability due to lack of sufficient regular income, leakages wherein intended beneficiaries are left untargeted, and provision of appropriate nutritional requirements. These schemes can be implemented at scale, and can explicitly target the poor and the vulnerable during periods of distress.80 The safety-net schemes can be the direct benefit transfer of about Rs 700 per month per family and Rs 500 per month per family for AAY and BPL households, respectively, that can improve their net benefits by 25-30% and better than physically distributing grain to the families. 81

The finance minister’s stimulus package announced cash transfers of 500 rupees per month through Jan Dhan accounts to approximately 200 million female beneficiaries. The stimulus also provides a one-time transfer of 1,000 rupees to 30 million senior citizens. However, India’s stimulus and economic relief package is the smallest in the world, including among emerging economies, whereas lock down measures had been stringent particularly for its

79 Shruti Rajagopalan; Alexander Tabarrok (2020); Pandemic Policy in Developing Countries: Recommendations for India. Web- https://www.mercatus.org/publications/covid-19-policy-brief-series/pandemic-policy-developing-countriesrecommendations-india 80 “Shielding the poor from the COVID-19 pandemic”; Ramji Krishnan & Vidya Ramji; August 19, 2020 81 ibid