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India Lacks Fiscal Resources To Implement A Universal Basic Income, Warns Arvind Panagariya

India may shortly detail and debate in its Economic Survey the cost benefits of a 'Universal Basic Income,' the radical idea that every citizen gets paid a minimum income despite economic status.

25/01/2017 12:55 PM IST | Updated 25/01/2017 3:19 PM IST
Adnan Abidi / Reuters

India is toying with the ambitious and radical idea of a universal basic income which proposes to pay a certain income amount – in cash or in kind – to every single citizen regardless of willingness to work or any other pre-condition. However, NITI Aayog Vice Chairman Arvind Panagariya, has warned that the country simply doesn't have the fiscal resources to pay for such a massive exercise.

Panagariya told the Indian Express that the sum that would be required to pay every Indian at even the current poverty line rates cannot be matched by the country's fiscal resources.

"The Tendulkar urban poverty line at 2011-12 prices is ₹1,000 per person per month. Due to inflation between 2011-12 and now, at today's prices, this sum would be significantly larger," said Panagariya. "But transferring even ₹1,000 per month to all Indians would cost ₹15.6 lakh crore (₹1,000 x 12 months x 130 crore people) a year. We simply do not have this magnitude of fiscal resources."

A universal basic income scheme could potentially replace existing government poverty alleviation schemes like MGNREGA and the extensive public distribution system that experts claim lead to economic 'leakages.' Advocates of universal basic income say the money spent on these schemes and subsidies could potentially pay for a basic income for every citizen.

In India, Chief Economic Advisor Arvind Subramanian is its chief advocate and the concept is widely expected to become part of the upcoming Economic Survey detailing its cost-benefits. Subramanian has said the government's proposed scheme could include making a cash transfer of about ₹10,000- ₹15,000 a year to every citizen.

While expert opinions vary on the feasibility of a minimum universal income and how it can be paid, even within the government, there doesn't seem to be consensus over how it should be paid.

According to Panagariya, this kind of an income scheme should first target the poor before becoming universal. "Any attempts to broaden the beneficiary base would come at the cost of a reduction in the possible transfers to the poor," he said, adding that the socio-economic caste census can help identify the poor with a "reasonable degree of confidence."

Recently, Niti Aayog CEO Amitabh Kant suggested the government could try universal basic income in the form of interest free loans to poor people for a period of three to four years, adding that universal basic income in and of itself could prbecome an important tool in the backdrop of the threat posed to jobs by automation.

Earlier this year, Finland launched a two-year pilot on universal basic income, becoming the first European country to do so. Its program will pay unemployed citizens from the age of 25 to 58 a guaranteed sum of €560. Switzerland has rejected the idea of a universal basic income.

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