The government could consider in this year’s Budget a targeted cash dole of Rs 5,000 a year for each jobless person from the poorest sections of society.
But to implement the scheme the government will have to dig into funds for a host of subsidies such as food, health and fuel.
The unemployment benefit is planned as a substitute for the universal basic income (UBI), which some countries are considering but India doesn’t have funds to go ahead with.
“We don’t have the money to introduce UBI. Even if we consider UBI at the value of the poverty line and that would mean 12.5% of the GDP. It’s not possible,” a top government official said.
The UBI is a form of social security in which residents of a country will regularly receive a sum of money from the government or public institutions.
It wasn’t clear how funds would be generated. But if any of the current subsidies are done away with to pay the jobless, it could trigger political and public outrage.
The Niti Aayog, the government’s think tank which replaced the planning commission, is working on the monthly social security scheme for the unemployed from poor families, especially those below the poverty line. The stipend works out to a little above Rs 416 a month.
States such as Kerala, Madhya Pradesh, Haryana, Punjab and Chhattisgarh have similar schemes for the jobless, but it will be a first by the Centre.
Apart from funds, the exercise could face stumbling blocks because of inadequate data on India’s unemployed.
In a workforce of 480 million as on 2015, more than 85% are in the informal sector, making it difficult to calculate the exact number of people without jobs.
Economists and social security experts were divided on the scheme.
“India is a growing economy, so deficit financing can be adopted where the money for a scheme like this can be financed through borrowing. It all depends on the spending priority,” economist Ajit Ranade said.
The economic survey of 2016 pegged India’s subsidy bill at below 2% of the GDP for 2015-16. This was largely on account of falling global crude prices. This bill was 4.2% the previous fiscal. But this does not include the spending on education, healthcare, mid-day meals and the public distribution system.
“The rational has to be clear. Which are the subsidies that can be replaced? Fertiliser subsidy is a production subsidy and cannot be removed as it is not a consumer subsidy,” explained Pronab Sen, former chief statistician of India.
Development economists such as Jean Dreze have argued against direct cash transfers, pointing to inadequacies in the banking system. Others warn of “leakage” of money dispensed for the jobless.
Sources said the 2017 economic survey could reflect a strong pitch for UBI.
No country has adopted the UBI. Finland will start an experiment with 2,000 citizens, while Switzerland voted against it last June. Madhya Pradesh conducted a small experiment in 2011, but never implemented.
(With inputs from Garima Garg)