UBI: A comforting balm


This year’s Economic Survey talked about rolling out a Universal Basic Income (UBI).That is a radical idea for tackling poverty. The Survey says that the scheme would nearly wipe out poverty although there are “considerable implementation challenges”. The report calls for pilot trials before rolling out UBI nationally. The idea behind universal basic income is simple: a regular state payment to all citizens, regardless of working status.

According to the chief economic adviser Arvind Subramanian, UBI would promote social justice, and empower the country’s poor. He  estimates that the scheme would reduce nationwide poverty to 0.5%, and cost between 4-5% of GDP.While that might sound expensive, the survey notes that India’s current welfare schemes like subsidies for food, fuel, and fertilizer  cost around 5% of annual GDP.

Another argument is that UBI   would be easier to implement than the current anti-poverty programmes, which are riddled with corruption. In a country of over 1.2 billion people, the task of identifying who is and isn’t in need of financial assistance is certainly messy and improvident. Yet, experts argue that something like a UBI could theoretically solve this problem. With the implementation of DBT and circumventing multiple layers of bureaucracy, the scope of financial “leakage” will be lower as we have seen in the case of LPG subsidy.

One strong argument in favor of UBI is that it is extensive in nature. The other argument is it doesn’t end the responsibility of the government. While many support UBI, there are some nagging doubts – particularly its implementation. Some economists opine that instead of UBI the MNREGA should be strengthened and the delivery system be made more foolproof.

Besides being a universal employment guarantee scheme, MNREGA has the ability to filter out the needy from the privileged. Also, it automatically excludes those who can’t accomplish heavy manual work. In that sense, UBI has to side with MNREGA.Experts agree that UBI can’t be implemented in isolation and it has to fall back on the existing poverty-alleviation n schemes.

As for the investment, it is estimated that to implement UBI the government has to spend 10 per cent of the GDP.Where from this money will come? Moreover, the proposed UBI is using old data: numbers that were assembled   some   twenty years ago.

To fund UBI, some economists propose a cut in ‘revenue forgone’ (renamed ‘revenue impact of tax incentives’) which is a staggering 6.11 lakh crore rupees. In 2015-16, the Centre lost this potential tax revenue due to various exemptions, concessions, rebates, etc, given to sections of taxpayers excluding export promotion-related concessions amounting to an additional Rs 50,938 crore.

Similarly, direct tax concessions worth Rs 68,711 crore were given to corporate bodies last fiscal. But the issue is why will the industry give up this concession? Another niggling question is even if 5-10 per cent of GDP is available to fund UBI, why shouldn’t it be invested in sectors like health care where the investments are abysmally low.

To make UBI more focused and in order to make a start, some economists have proposed to bring the two important subsidy programmes under its ambit: pension presently given to widows,   disabled and the old. Some 2.5 crore people have been benefitted by this scheme who get between 200 -1400 rupees per month. The other subsidy programme is the proposed six thousand rupee incentive to be given to every new born under the national food security act.

Since working women in organized sectors avail four months maternity leave with pay, those who are in the unorganized sector getting six thousand rupees inducement for the new born and the post–natal mother care makes a lot of sense.

Another advantage of UBI is that the numbers can be easily arrived at for all the four categories –old, widow, disabled, post-natal mother. Also, they belong to the poor and the deprived segment. In terms of volumes, the total outgo will be around 1.56 lakh crores per annum which is a mere 1.5 per cent of the GDP.

As far as implementation of UBI goes, these subsidies can go to the right people and the success can be visible. All the incentives will go through the bank and there are lesser chances of pilferage. By universalizing the old-widow-disabled pension, there won’t be additional burden on the exchequer.Thus the universal basic income concept can be a happy augury.

In the budget for 2017-18 Finance Minister Arun Jaitley has been down to business to provide job- growth and reassuring the Modi government’s development agenda. Three years through the NDA government, jobs and growth has not been noticeable and demonetization has given a big blow to work and earning. Surely, UBI can be a comforting balm if implemented with sincerity.

Bhaskar Parichha

Bhaskar Parichha is a Bhubaneswar-based senior journalist and author. He writes on almost every conceivable topic but is more obsessive about   writings on society and culture.