Universal income scheme may get Budget nod

Stung by the nation-wide farmers' agitation recently, finance minister Arun Jaitley may come out with a surprise move with the announcement of the universal income scheme in the interim budget, which may cost the exchequer as much as Rs 3.1 lakh crore annually. However, it may take years to implement such a massive scheme like the UPA's food security programme.

Experts say the likely announcement of the universal income scheme could be on the lines of Ryothu Bandhu scheme in Telangana, which helped the regional TRS party to come back to power in the recent state assembly elections.

Unlike farm loan waivers or minimum support prices for specific crops, a Rythu Bandhu-type income support scheme does not damage credit culture or distort markets. However, the Rythu Bandhu scheme excludes tenant croppers who consist of around 13.7% of farm holdings all across India.

Under Rythu Bandhu, the government provides Rs 4,000 per acre per season. The Ryothu Bandhu-type scheme would cost much more than the farm loan waivers recently announced across the states. Moreover, such a farmer-specific scheme might encourage people to remain tied to agriculture, a relatively less productive sector of the economy.

There are also views among the experts the scheme should be targeted to benefit only poor farmers so that it will cost the government less money. But the problem with targeted schemes is that it encourages corruption thereby plugging leakages become more difficult. Also, the implementation of universal schemes is easier through direct benefit transfer.

But there are other headaches in implementing such a massive scheme. The main issue would be how to ensure that landowners pass on the income to tillers.

Renowned economist and former chief statistician, Pronab Sen, told DNA Money that income support as against price support may work in southern states barring Kerala as they follow ryotwari system where small farmers own and till the land. In North India, it is difficult to implement farm income support schemes as persons owning land and tilling the land are different as they follow the tenancy system where tenants cultivate the land and not the owner. "The problem would be how to ensure that the income support is passed on to the tiller. Demonetisation has harmed farm and informal sectors very badly It will take years for the new government to set right this humongous damage," Sen said.

There is bound to be major announcements to rural development and farm sector, said N R Bhanumurthy of NIPFP, adding this being an election budget there will be some big surprises.

Usually, in the interim budget, the outgoing government as per the convention does not announce major schemes and leave all such issues for the new government to take a call. But last decade or two, successive outgoing governments have announced major populist schemes and used the interim budget to unveil virtually the ruling party's economic manifesto for the ensuing elections.

There are already talks of the salaried class getting some income tax relief. But there is also a view why should an outgoing government provide tax sops to salaried class, which is not a vote bank for any political party. Still, there are expectations that the income tax exemption limit will be raised to woo the middle class. This is something which no new government will attempt to reverse it.

Renowned economist and former chief statistician, Pronab Sen said some are already talking of raising income tax exemption limit but this will not "cut much ice" with voters as salaried class form a very small percentage of voters in the country.

But more importantly, the Modi government, like any other government in the past, will certainly utilise the opportunity to make big-ticket announcements in the budget, which would virtually be ruling party's economic manifesto ahead of elections.

Two areas that needed immediate attention are the farm sector and massive loss of jobs, particularly after demonetisation which has harmed farm and informal sectors very badly. It will take years for the new government to set right this humongous damage, said Sen.

Both Sen and Bhanumurthy were of the view that there will definitely be major announcements for the rural and farm sector.

There is bound to be major announcements to rural development and farm sector, said Bhanumurthy, adding this being an election budget there will be some big surprises.

Realty developers too are expecting some sops for boost, which has started looking up this financial year, after years of slowdown.

COST FACTOR

• Rs 3.1 lakh crore – the cost to exchequer on implementing universal income scheme
   
• Rs 4,000 – per acre per person government provides under Rythu Bandhu scheme
   
• 13.7% – tenant cropper account for of the total farm holdings across India