Economic Survey: Implementing Universal Basic Income needs a strong political will

New Delhi: Whether the poorest of the poor Indians get some form of monthly income from the government may be more about political will and less about fiscal considerations. With the Chief Economic Advisor Arvind Subramanian saying in the Economic Survey today that such a scheme is desirable to eliminate poverty but time is not ripe for its implementation - it is apparent that the government lacks political will at present to implement such a scheme. The Universal Basic Income (UBI) may remain a pipe dream for now. Will it inch towards implementation in the next Budget, when electoral considerations may make it more expeditious for the government?

Sarath Davala, coordinator of India Network for Basic Income, says having a UBI scheme in place is possible if there is political will and for a start, it could be a targeted scheme, which means a guaranteed monthly income is not credited to every Indian’s bank account. “The government can start UBI for the extremely poor or choose some other targeted demographic group, where targeting is not difficult. By devising a ‘‘üniversal” scheme, it would foreclose the idea because of volumes we are speaking of. No country around the world has implemented it universally".

The Survey, which was tabled in Parliament today and is a report card of the economic performance of FY17, says that a UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP. But this is based on a significant assumption: that those in the top 25 percent income bracket do not participate. This means even the Survey is proposing a targeted income scheme, not a universal dole. The Survey goes on to note that the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP. So even a targeted monthly income in the hands of India’s disadvantaged will have a significant fiscal cost.

The critical aspect of such a scheme remains its individuality: It should be launched when all other state expenditures as subsidies are withdrawn - which is precisely why it needs more political will than fiscal prudence. The Surevy itself points out that UBI should be an alternative, not an add-on, to the various social welfare schemes currently in force. The Survey juxtaposes the benefits and costs of the UBI scheme in the context of the philosophy Mahatma Gandhi. “The Mahatma, as astute political observer, would have anxieties about UBI as being just another add-on Government programme, but on balance, he may have given the go-ahead to the UBI.”

The Survey lists out challenges in UBI implementation:

1) It would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, making itself fiscally unaffordable. But this is precisely a targeted programme with adequate implementation machinery would prevent!

2) Based on a survey on misallocation of resources for the six largest central sector and centrally sponsored sub-schemes (except PDS and fertilizer subsidy) across districts, the Survey says the districts where needs are the greatest are precisely the ones where state capacity is the weakest. This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI. But the Survey does not actually suggest a roadmap for preparing the country for an eventual UBI scheme.

3) Centre-state negotiations for cost sharing of this programme. Again, this requires political acumen, deft handling and some hand holding of states - specially since many are already riled by the impending GST rollout and its fiscal implications.

India Network for Basic Income conducted pilots in some villages in Madhya Pradesh for a UBI scheme. For 12-17 months, over 6,000 individuals received small unconditional monthly cash transfers, or grants under the two pilots The central design premise of the pilot was that the basic income was paid every month, to all individuals within a village. Every individual registered as a usual resident at the launch of the project received the income, the only requirement being that they opened a bank account within three months of the launch. Transfers for children under the age of 18 went to the mother or, if there was no mother, a designated guardian.

Davala says the pilots found that those who received basic income reported a significant increase in their food sufficiency six months into the intervention. Receipt of basic income had a significant impact on children’s nutrition, particularly nutrition levels of female children and children from vulnerable groups such as the Scheduled Tribes. Basic income improved capacity of households to buy from the market, resulting in a qualitative shift in their food basket; but more money did not result in more expenditure on alcohol.

He also says that various international experts have suggested that a UBI of Rs 1,000 per individual per month for the “extremely poor” should be a doable idea by the government. “And no, it won’t become chaotic because government is already implementing portability of fair price shops”.

So why is India even considering a universal basic income, when world over even developed countries are still examining the idea and its pitfalls? The driving force for providing a minimum level of sustenance to each citizen seems to emanate from the growing realization that the nature and availability of jobs has altered significantly around the world. There are fewer jobs due to increasing automation and then, there are more of these jobs which require higher skills, higher pay. For India, the situation has been particularly grim over the last two years as job creation has been at abysmally low levels even when the economy was galloping.

In this piece , BJD MP Jay Panda – who advocated UBI much before demonetization – says the new economy of the 21st century - not just in India but everywhere in the world - is having a lot of automation and robotics, which means job creation is much less than before. For example today, if we have 7% growth rate in the Indian GDP, it creates less jobs than 7% growth rate would have created in 1990s. He refers to the World Bank estimate of 68% of existing jobs in India being under threat in the coming 10 or 20 years due to technology. “Because of automation and robotics, even factories which used to employ hundreds of people today can manage with only five or seven people because they use robots for manufacturing.”

In essence, the inability to create the required number of jobs at a pace which matches India’s GDP growth could be the trigger for a UBI scheme being announced in the forthcoming Union Budget.

Not everyone is gung ho about this prospect though. Professor of Economics at JNU, Jayati Ghosh, told Firstpost earleir that if the government was serious about helping citizens, “it would begin with implementing a universal basic pension first, at half the minimum wage”. This would mean a monthly pension of Rs 3000-4000 against a barebones Rs 200 that is now being paid every month– and even this amount is not universal but targeted pension.