The Economic Survey 2016-17 tabled in Parliament today by the Union Finance Minister Arun Jaitley has finally made it clear where it stands on the concept of Universal Basic Income. Advocating the concept as an alternative to the various social welfare schemes in an effort to reduce poverty, the survey has listed out the benefits and costs of the UBI scheme.
The survey points out that while it is a conceptually appealing idea, there are several implementation challenges. One big risk it points out is of the scheme becoming an add-on rather than a replacement of current anti-poverty and social programmes, making it fiscally unaffordable.
Referring to misallocation and leakages of resources for the six largest Central Sector and Centrally Sponsored Sub-Schemes (except PDS and fertilizer subsidy) across districts, the Economic Survey points out that a more efficient way to help the poor would be to provide them resources directly, through a UBI.
But the survey lists out two prerequisities for a succesful UBI- a functional JAM ( Jan Dhan, Aadhar and Mobile) system and Centre-State negotiations on cost sharing for the programme.
The Survey says a UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP, assuming that those in the top 25 percent income bracket do not participate. On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP.
The Survey concludes that the UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion.
India is not the only country talking about Universal Basic Scheme as a means to fight poverty and provide all citizens a basic income irrespective of whether they contribute to the economy productively or not.
Long term proponents of UBI like the British economist Guy Standing blames globalisation for having plunged more and more people into the precariat, which he analyses as a new emerging social class. A basic income scheme will help counter the systemic insecurities that are pervasive in the open economies of the era of globalisation, says Standing.
Speaking to The Indian Express, Standing had advocated introducing the scheme for all adults and not merely for BPL population, to eliminate the risks of identifying the poor and accurate targeting. A UBI should be given individually to all adult men and women and is perfect for a country like India more than any other country, according to Standing.
Interestingly pilot projects are already underway in many countries. Finland’s social security body, Kela has recently launched an experiment to test the feasibility of UBI. They also aim to check through this pilot project whether basic income would encourage unemployment.
A group of 2,000 persons selected at random will be paid a basic income for two years and unlike other social security benefits provided by Kela, the basic income is not available on application. These unemployed candidates between the ages of 25 and 58 have been offered a monthly basic income of 560 euros and this amount will replace all existing allowances and will be paid irrespective of whether the recipient looks for or finds work.