The upcoming Economic Survey, which will be tabled in Parliament before the Budget, will have a chapter on the feasibility of a radical concept: a universal basic income (UBI). While UBI is unlikely to be implemented on a major scale anytime soon, the concept is arguably one of the most disruptive in welfare economics.

 

According to the Basic Income Earth Network, an academics network, “a UBI is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.” Economists in favour of the concept claim that it is more responsive to the needs of a world economy that is being disrupted by information technology and automation. A UBI, in theory, would provide a security net for all citizens, irrespective of their health or employment status.

 

The benefits of such a radical concept are obvious. Both the Central and State governments provide numerous subsidies, many of which serve the same purpose. Speaking at a Gandhi Jayanti event in 2016, Chief Economic Advisor Arvind Subramanian noted that the Central Government itself provides nearly 1,000 subsidy schemes for the poor.

 

Noting many of these schemes never reach their intended beneficiaries, Subramanian also explained that the nature of poverty has changed. While earlier, people were poor by virtue of birth (e.g., Dalits, Adivasis), now vagaries in climate, a drop in agricultural production and unemployment were the chief factors contributing to poverty. He said a UBI framework could address these issues. It would cut out bureaucratic tardiness and middlemen.

 

UBI would provide cash in the hands of its intended beneficiaries, who can use it at their own discretion to avail of goods and services. However, experts have raised valid questions on how UBI can be implemented. These include:

 

How much should be given? Economists note that a UBI scheme, at a minimum, should be fixed at a level that is just above the poverty level. The report of the C Rangarajan Committee on measuring poverty fixed this level as being between ₹32 and ₹47 daily. According to a report on Scroll, this would come to less ₹1,000 a month per person if we took ₹32 as the base. Would this amount help a poor family living in an urban area? Would it suffice for emergencies? Can specific subsidies related to agricultural products or education be replaced with such an amount?

 

How will it be paid for? In the aforementioned report in Scroll, even if only the 37.5 crore people who are below the poverty line get less than ₹1,000 a month, it would cost the exchequer around ₹4.32 lakh crore. The figure would skyrocket if the scheme were extended to all Indians. The only ways to finance such major expenditure would be to raise taxes or cut subsidies — both politically suicidal moves.

 

Is the infrastructure in place? Given the massive disparities in the availability of basic healthcare, schools and food supplies across the country, implementing UBI will be easier said than done. The lack of banking inclusion remains a major problem as shown in the aftermath of demonetisation. The success of UBI in rural areas of poorly developed states would need the beefing up of, not the drawing down of, government welfare schemes.

 

Economists who favour UBI in India have called for its introduction in schemes targeted at vulnerable sections such as senior citizens and pregnant women. This would not only help gauge its effectiveness but also help improve the material infrastructure to provide services. Three major pilot schemes of UBI have been carried out in India. In Madhya Pradesh, one of the schemes was implemented for 18 months, bringing noticeable improvements in nutrition, healthcare and academic performance.