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During Jaitley US trip, Universal Basic Income idea for India in IMF spotlight

What do you get when you stir up a cocktail with 30 crore plus Jan Dhan accounts, Aadhaar linked bank accounts and the lingering carrot of Universal Basic Income? If it happens, an election year cracker.

As economists nitpick on the economy’s growth numbers - the new bling in Indian politics, the parallel undercurrent of direct income transfers as an idea whose time has come is undeniable.

 During Jaitley US trip, Universal Basic Income idea for India in IMF spotlight

Finance Minister Arun Jaitley/ AFP

Stung by sharp criticism from within his own party, Finance Minister Jaitley who is currently in the US has been at pains to drum up the upside of the “speed” at which India’s economy is becoming “cleaner”. In tandem, the FM has been slipping in references to Jan Dhan accounts and the widening tax base while praising the shock demonetisation of the lion’s share of India’s currency last November as proof of a “decisive” leadership.

As on October 31, per government figures, 30.38 crore Indians have Jan Dhan accounts with a total deposit base of ~Rs. 68 crore.

India’s chief Economic Adviser has made it clear that Jan Dhan accounts will be one of several conduits for routing UBI. “Anyone with an Aadhaar-seeded bank account would be eligible for UBI. The focus on Jan Dhan reflects the importance of these accounts for the poorest,” says the latest Economic Survey.

Since the time of the most recent Budget when Subramanian introduced a detailed chapter on the subject, Universal Basic Income has been enjoying a merry uptick in both national and world consciousness.

Subramnaian devoted 23 pages in the Economic survey for the UBI, starting and ending with quotes from Mahatma Gandhi.

At the IMF headquarters on Thursday, addressing a packed room, Delphine Prady, author of the Universal Basic Income chapter in the IMF Fiscal Monitor released this week said “now” is as good a time as any for governments wanting to launch UBI.

“We have to understand all the three words in Universal Basic Income. Universal means without strings, without any means-tested redistribution. There is no conditionality and it goes to every individual which is distinct from citizen or resident”, she said, explaining the puritan’s version of the UBI.

“Remember that you have to find a way to finance it. Once you find a way to finance it, now is a good time to start because of the time we live in. We live in a time of far more employment related uncertaintly than any other time. UBI provides protections in such uncertain times”.

Subramanian strikes the same notes of equity, generosity and progressive values in his argument for going the UBI way: “If, as appears to be the case, that thinkers on both the extreme left and right have all become its votaries, then UBI is a powerful idea whose time even if not ripe for implementation is ripe for serious discussion. One can easily imagine the Mahatma as fair mediator, deliberating and examining both sides of the argument carefully. The Mahatma as the embodiment of universal moral conscience would have seen the possibility of UBI in achieving the outcomes he so deeply cared about and fought for all his life. But the Mahatma as moralist would have had doubts because of seeing uncompensated rewards as harming responsibility and effort. As a social conservative he would permit UBI only if convinced that macro-economic stability would not be jeopardized. Recognizing the difficulty of exit, 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. Or so one might tentatively infer.”

Connecting all the dots - the more frequent references to Jan Dhan accounts by India’s top politicians, a special mention of an Indian UBI case in the IMF Fiscal Monitor and slowing economic growth becoming a drag on the incumbent government’s image, something’s certainly afoot.

“The UBI amount will be a crucial factor in ensuring the success of such a programme. A key federal question will be the centre-state share in funding of the UBI. This would, like the GST, involve complex negotiations between federal stakeholders”, writes Subramanian.

But there’s another, most crucial part to that - “a minimum level of UBI can be funded wholly by the centre.”

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Updated Date: Oct 13, 2017 07:54:01 IST