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In the last few years we have seen several experts suggesting for a universal basic income (UBI) for India. The idea got strengthened when the Economic Survey 2016-17 proposed for the same—articulating very sound logic in its favour. By March 2017 the Government announced that such a scheme may be piloted by late-2017 and implemented to a limited scale by the year 2018-
19. Although, before going for such a scheme8 the Government of India (GoI) needs to settle several concerns involved with it.
We find the idea of UBI gaining ground among several countries across democracies and non-democracies—right from France to Finland to China (where a similar scheme, the dibao, is implemented). Such a scheme is generally proposed as a non-targeted one in which a fixed sum of cash is
periodically transferred to all on individual basis. The idea is to ensure that every person in society has the means to live with a certain freedom and dignity, independent of capacity to earn or availability of employment. The idea really looks attractive as it has potential to reduce both poverty and inequality.
India already piloted such a scheme in Madhya Pradesh by 2010. The Economic Survey 2016-17 proposed an amount of Rs 7,620 a year to be transferred into the bank accounts of the beneficiaries of the UBI. Though it is well short of what anyone might need to lead a life of leisure, it would cut absolute poverty from 22 per cent to less than 0.5 per cent. Theoretically, the UBI is proposed to be financed through recycling funds from around 950 welfare schemes (costing around 5 per cent of the GDP) presently run by the GoI aimed at offering subsidised food, water, fertilisers and many other things. A big part of Government’s subsidies is enjoyed by the rich people in the country (as per the Economic Survey 2015-17) which can also be rejigged for this purpose.
There are several important issues to be settled before India launches such a scheme. A brief survey of the major issues involved with it is given below:
Financial model: The first and foremost issue is mobilising adequate fund for it. If we go into the proposal of the ‘Economic Survey 2016-17’, the advice is to recycle the funds of the existing central sector and centrally sponsored schemes run by the GoI. But such schemes cannot be shut down to start UBI. This could be done in phased way only. Till then the GoI needs to mobilise additional funds for it through budgetary or non-budgetary sources. Given the projection that once the proposed GST is implemented from July 2017, the shortfall in the tax collections is estimated to remain around Rs 66,000 crore (due to curtailment of many cesses and surcharges), budgetary support does not look a very viable option.
Though certain other positive measures are also in the pipeline, such as increased tax compliance due to emphasis on less-cash, the proposed ceiling on cash transactions, linking Aadhar to PAN for filing income tax returns and linking Aadhar to transactions, etc., the implementation of the GST is
supposed to increase tax collections (though in medium term) together with checking the evasion of direct and indirect taxes.
Selecting the beneficiaries: Clues from the name suggest it to be applying on all. But as per the Survey as well as the GoI expressions, the scheme is proposed to be launched partially. In this case, the target population may be taken from the lower strata of the below poverty line. The NITI Aayog CEO has proposed it for the bottom 20 per cent of the BPL population at the time of its launch. This could be linked to the general policy framework of social justice also. This will not only keep the financial requirements on lower side but also give some time to the government to recycle the funds from several welfare schemes it either runs or sponsors. A suggestion came from the GoI in favour of transferring the cash into the accounts of women head of the family (which will promote the ideas of inclusive growth and women empowerment also).
The amount of transfer: How much money should be transferred though is guided by the availability of resources, it should look sizeable to show an impact on the beneficiaries. As a proposal, the NITI Aayog CEO has proposed a sum of Rs 1,000 on monthly basis while the survey proposed (more as an example) a sum of Rs 7,620 monthly. Normally, it is believed that without transferring a sizeable amount of money (which may bring in comfort to the beneficiaries), the scheme may not remain effective. Though, to begin with even a lower sum of transfer also looks good.
Financial inclusion, inclusion and exclusion, regulation and assessment, etc. are the other involved issues related to it. The scheme looks under examination and study of the GoI in present time. Once it is announced only then these concerns will settle down.
The welfare schemes India has been implementing have been faced with certain common problems, misallocations of funds, wastage and seepage, inclusion and exclusion factors, ghost beneficiaries, corruption, the cost of operating them, etc. being the major ones. For this and other reasons, it has been argued to give serious consideration to the idea of the UBI. This will have several merits in it missing the current redistribution schemes, such as:
(i) It will be given from above minimising several maladies of existing schemes.
(ii) It is less likely to be prone to exclusion errors.
(iii) By directly transferring money to bank accounts, and bypassing multiple layers of bureaucracy, the scope for ‘out of system’ leakages (in case of the PDS running up to 45 per cent) will be quite lower.
There are considerable challenges of implementation, which will have to be debated and addressed properly before going for the UBI. But the challenges are not insurmountable; besides several possible ways are available to address them. As the support for the idea has come from a broad ideological spectrum, it looks as if the time for such a scheme has arrived in the country. We should think proactively in the direction.