Samarth Patil
“Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and yourself melt away.”
– Mahatma Gandhi
In recent years, the implementation of Universal Basic Income [“UBI”] has been topic of deliberation across wide-ranging sections of the society including economists, social sector professionals, multilateral development institutions, politicians, and even tech entrepreneurs. UBI is a form of social security which assures regular and unconditional transfer of funds to citizens from the Government. It is characterised by the following three key characteristics:
– Universality (i.e. every citizen receives cash payments);
– Unconditionality (i.e. payments are without any strings attached); and
– Agency (i.e. cash transfers without dictating the recipients’ choice).
UBI is being considered as an ambitious measure which will not only ensure welfare for the starving millions but also drastically reduce dependence on numerous existing social welfare schemes. It will simultaneously curtail challenges posed by the tectonic shifts on account of new technologies such as Industry 4.0. Globally, UBI seems to enjoy the support of both sides of political spectrum (i.e. the left wing and right wing) and even in India, UBI seems to enjoy support from both major national political parties.
India and implementation of UBI
In India, the idea of implementation of a Universal Basic Income was espoused by the Economic Survey of India 2016-17 [“Economic Survey”] which extensively contemplated the advantages and disadvantages (see table 1) of the radical new vision of UBI and the roadmap for its implementation. The Economic Survey mentions that UBI will lead to poverty alleviation and reduction in vulnerability for the weaker sections of the society.
It is believed that effective implementation of UBI can lead to administrative efficiency since variety of subsidies and welfare schemes can be consolidated. The Economic Survey mentions that, most importantly, UBI will unburden the poor from task of finding work for daily survival and help them to improve socio-economic factors such as health, literacy and education. However, the Economic Survey concluded that that UBI is a powerful idea whose time, although not ripe for implementation, is ripe for serious discussion.
Now, after almost two years of contemplation and discussion, it is widely believed that the Government may introduce UBI as an alternative to numerous existing subsidies for fertilisers, interest / loans, power and water tariffs. Therefore, it is important to review India’s blueprint and roadmap for implementation of UBI.
The Economic Survey clearly laid down the following principles that could help guide thinking about UBI:
– Quasi-universality:
Exclusion of the non-deserving based on assets ownership; schemes such as “Give It Up” for LPG subsidy; publication of beneficiary lists to ensure the undeserving do not avail benefits.
– Gradualism (Implementation in an incremental and phased manner):
For specific groups, say only for widows and the old; for specific areas, say rural areas; optionally to beneficiaries as substitution for existing schemes etc.
Recent experiments in India
The closest approximation of the Universal Basic Income, in the Indian context, are the pilot exercises of direct benefit transfer (DBT) in lieu of Public Distribution System, in Chandigarh and Pondicherry, which offer a cautionary tale. In recent years, DBT was introduced and rolled back within two months in Pondicherry, only to be reintroduced. It is observed that the most beneficiaries must shell out a higher amount for similar quantity of food grains. The data from recent studies1 about the effectiveness of DBT reflects quantitative and qualitative issues around:
- Co-ordination between Centre and State implementing agencies;
- Access to cash-out points at the last mile;
- Sufficiency of the transfers received; and
- Concerns around diversion.
In context of implementation of DBT it is mentioned that these decisions must be taken at the state level, considering the local social context and presence of important pre-requisites, such as better targeted communication campaign, streamlined enrolment process, robust banking network, sufficient DBT amount, and an overarching beneficiary-centric grievance redressal mechanism2
Recently, the Government of Telangana launched the Rythu Bandhu Scheme which proposes providing Investment Support Agriculture and Horticulture crops by way of grant of Rs. 4,000 per acre per farmer each season for purchase of inputs like seeds, fertilizers, pesticides, labour and other investments in the field operations of the farmer’s choice. However, the benefits are largely restricted to landed farmers and the linkage to farm areas crowds-out the marginal farmers and landless labourers from benefits of the Scheme.
The KALIA scheme of Government of Odisha attempts to solve the problem of exclusion by providing blanket assistance to everyone engaged in agriculture. The impact and effectiveness of these recent initiatives at state level should be closely monitored and carefully analysed before nation-wide implementation of UBI.
Challenges of UBI
Inspite of the simplicity of approach and optimistic tone of the Economic Survey, the roadmap for implementation of UBI could be a case of over-promising achievements and under-delivering performance. While the Economic Survey itself highlights some major concerns about implementation and suggests mitigation measures, these may not be adequate against the inherent conceptualisation and implementation risks of a proposal as ambitious and wide-sweeping as the UBI.
UBI is a conceptually appealing and politically lucrative idea but it would face numerous implementation challenges and will not be smooth sailing. Some of the challenges can be overcome by gradual implementation combined with usage of recent governance initiatives such as “J-A-M” i.e. JanDhan Yogana – Aadhar – Mobile linkage and creative adoption of new technologies such as Blockchain which can enable tracking of resources till last mile delivery.
While the idea is to consolidate several centrally-sponsored schemes that cost upto 5 – 6 per cent of the GDP for creating fiscal space for implementation, UBI should get a go-ahead only if absolutely convinced that macro-economic stability would not be jeopardized. It is believed that the threshold amount of UBI for creating a meaningful impact would be substantially higher than the present poverty line. In this regard, former Niti Aayog Vice-Chairperson Mr. Arvind Pangariya had mentioned that “At the current level of income and our needs for investment in health, education, infrastructure and defence, we simply do not have the necessary fiscal resources to transfer a reasonable basic income to 130 crore Indians.” Thus, the cost of providing UBI might end up being higher than cost of subsidies currently incurred by the Government.
Policy-makers are aware that what is good for the goose may not always be good for the gander. While UBI allows individuals greater freedom to choose, it reduces the leeway available to Government for addressing critical objectives and goals such as United Nations Sustainable Development Goals which cannot be simply substituted by cash transfers.
Further, hunger is far worse than poverty and the importance of robust mechanism for delivery of food grains and nutrition to the needy cannot be adequately emphasised. Similarly, expenditures for universal education and affordable healthcare are important for long-term and equitable growth. Therefore, the UBI scheme is envisioned to be funded largely by phasing out and eventual elimination of existing schemes related to agriculture inputs and employment generation.
Impact on prevalent schemes
The Government of India has made remarkable progress in bringing down poverty from about 70 percent at independence to about 22 percent3. India has a network of over 5,00,000 Fair Price Shops under the Public Distribution System which is among the largest distribution networks of its kind in the world. While the existing schemes are frequently criticised for misallocation and leakages, the implementation of UBI while seemingly simple does not assure immunity from limitations of the existing programs.
Further, adoption of new technologies (which are anyways pre-requisites for implementation of UBI) may also result in operational efficiencies and effective implementation of existing subsidies and schemes. Although, it might be difficult and arduous task to fix the deficiencies in the existing system, it would enable better and more efficient pursuit of pre-determined objectives.
Conclusion:
The challenges posed by the tectonic shifts on account of new technologies such as Industry 4.0 and pervasiveness of Artificial Intelligence may not be adequately curtailed by UBI. It would require more robust and proactive training and reskilling of the existing workforce to take these challenges head-on. Afterall, give a man a fish, and you feed him for a day; teach a man to fish, and you feed him for a lifetime.
Globally, few Governments with consistent fiscal surplus and adequate reserves such as Finland, the Netherlands, and Ontario Province, Canada4 are piloting UBI projects and few non-profit organisations such as Give Directly in Nairobi, Kenya and Eight in Fort Portal, Uganda are experimenting with effectiveness of UBI. However, evidence of improvement in outcomes in these experiments and an in-depth analysis of feasibility should be a pre-requisite for implementation of UBI in India.
While India strives to fulfil Mahatma Gandhi’s ambition of wiping every tear from every eye, implementation of UBI may not be justified as means to the end, atleast presently.
Table 1: Arguments in Favour and Against UBI5
| Sr. No. | Favour | Against |
| 1 | Poverty and vulnerability reduction Poverty and vulnerability will be reduced in one fell swoop. | Conspicuous spending Households, especially male members, may spend this additional income on wasteful activities. |
| 2 | Choice A UBI treats beneficiaries as agents and entrusts citizens with the responsibility of using welfare spending as they see best; this may not be the case with in-kind transfers. | Moral hazard (reduction in labour supply) A minimum guaranteed income might make people lazy and opt out of the labour market. |
| 3 | Better targeting of poor As all individuals are targeted, exclusion error (poor being left out) is zero though inclusion error (rich gaining access to the scheme) is 60 percent. | Gender disparity induced by cash Gender norms may regulate the sharing of UBI within a household – men are likely to exercise control over spending of the UBI. This may not always be the case with other in-kind transfers. |
| 4 | Insurance against shocks This income floor will provide a safety net against health, income and other shocks. | Implementation Given the current status of financial access among the poor, a UBI may put too much stress on the banking system. |
| 5 | Improvement in financial inclusion Payment – transfers will encourage greater usage of bank accounts, leading to higher profits for banking correspondents and an endogenous improvement in financial inclusion. Credit – increased income will release the constraints on access to credit for those with low income levels. | Fiscal cost given political economy of exit Once introduced, it may become difficult for the government to wind up a UBI in case of failure. |
| 6 | Psychological benefits A guaranteed income will reduce the pressures of finding a basic living on a daily basis. | Political economy of universality – ideas for self-exclusion Opposition may arise from the provision of the transfer to rich individuals as it might seem to trump the idea of equity and a state welfare for the poor. |
| 7 | Administrative efficiency A UBI in place of a plethora of separate government schemes will reduce the administrative burden on the state. | Exposure to market risks (cash vs. food) Unlike food subsidies that are not subject to fluctuating market prices, a cash transfer’s purchasing power may severely be curtailed by market fluctuations. |
1Feeding India’s Poor, Lokesh Kumar Singh (2016)
2 Spreading JAM across India’s economy, Economic Survey of India 2015-16
3 Tendulkar Committee (2011)
4 Effective March 2019, Ontario is winding down the pilot project due to unsustainability.
5 Extract from Economic Survey of India 2016-17. It provides an extensive analysis of Universal Basic Income.
