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'Time Is Ripe', Economic Survey Makes A Strong Pitch For Implementing Universal Basic Income For The Poor

UBI would reduce poverty to 0.5%, it claimed.

31/01/2017 7:25 PM IST | Updated 31/01/2017 7:34 PM IST
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NEW DELHI -- Invoking Mahatma Gandhi's vision of "wiping every tear from every eye", the Economic Survey today made a strong pitch for implementing Universal Basic Income (UBI) that stipulates a certain income for the poor.

"UBI is a powerful idea whose time, even if not ripe for implementation, is ripe for serious discussion," said the Economic Survey for 2016-17, which was tabled in Parliament by Finance Minister Arun Jaitley.

Stating that the Mahatma would have anxiety about UBI as being just another add-on government programme, but on balance may have given the go-ahead, the Survey pointed out that the two pre-requisites for its success are functional JAM (Jan Dhan, Aadhar and Mobile) and Centre-state negotiations on cost sharing for the programme.

The Survey estimated that a UBI that reduces poverty to 0.5 per cent would cost 4-5 per cent of GDP, assuming that those in the top 25 per cent income bracket are not part of the loop.

"On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 per cent of GDP," it said.

Noting that despite making remarkable progress in bringing down poverty from about 70 per cent at Independence to about 22 per cent in 2011-12 (the Tendulkar committee), the pre-Budget document stressed that "wiping every tear from every eye" is about a lot more than being able to imbibe a few calories.

"And the Mahatma understood that better, deeper, and earlier than all the Marxists, market messiahs, materialists and behaviouralists," the Survey said, in unequivocal terms, in a chapter titled 'Universal Basic Income: A Conversation With and Within the Mahatma'.

It has been necessitated in India, according to the Survey, all the more because there is weakness in existing welfare schemes that are plagued by misallocation, leakages and exclusion of the poor.

The central government alone runs close to 950 central and centrally-sponsored sub-schemes, which cost about 5 per cent of GDP, the pre-Budget document said, adding that "clearly there is rationale for many of them, but there may be intrinsic limitations in terms of the effectiveness of targeting".

Listing out reasons for UBI, the survey said the scheme will reduce poverty and vulnerability, result in better targeting of the poor, provide insurance against shocks, result in improvement in financial inclusion and also provide psychological benefits.

Observing that UBI, based on principles of universality, unconditionality and agency, is a conceptually appealing idea, the Survey also spoke of implementation challenges.

Citing a survey on mis-allocation of resources for the six largest central sectors and centrally sponsored sub-schemes (except PDS and fertiliser subsidy) across districts, the Economic Survey pointed out that the districts with most requirements 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 UBI," it reasoned.

Against the backdrop of rising concerns that technological innovations and automation could take away jobs, the idea of universal basic income is gathering steam, which will ensure a certain amount of income for the poorest.

Finland has started experimenting with this concept and other countries are likely to follow suit.

Last year, voters in Switzerland rejected a proposal for such a universal basic income.

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