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Even after three decades of sustained economic growth and a proliferation of welfare schemes, roughly one in three Indians still live below the poverty line, according to the last report on poverty estimates submitted by the Rangarajan committee in 2014.The persistence of poverty and significant leakages in welfare schemes that aim to alleviate it has prompted many academics and policymakers to explore more efficient alternatives to India’s creaky and leaky welfare architecture.One of the suggestions has been to move towards a “universal basic income”.
One of the earliest proponents of some form of basic income was Spanish philosopher Johannes Ludovicus Vives, who proposed that the government should ensure the minimum level of subsistence for all, but only to those who showed willingness to work. Thus, Vives’s idea of a basic income was not unconditional.Thomas Paine, one of the US’s founding fathers, argued that every person was entitled to an equal basic endowment because “the earth, in its natural, uncultivated state was... the common property of the human race”.Years later, British philosopher and mathematician Bertrand Russell, in his 1918 book Roads to Freedom. Socialism, Anarchism and Syndicalism, argued that “a certain small income, sufficient for necessaries” should be unconditionally provided to all.
The universal basic income, as it is understood today, has three distinguishing characteristics:
Arguments against UBI
(i) ‘UBI would reduce the incentive to work and create dependence on doles’: Such an outcome is extremely unlikely given the modest level of the proposed income supplement.
(ii) UBI would divert State spending from critical items such as infrastructure, education, and healthcare, which are essential requisites of long-run inclusive growth’: UBI is meant to complement desirable social spending, not replace it. The available fiscal potential is large enough to ensure that this kind of ‘crowding out’ is avoided. In practice, a programme of ‘deep fiscal adjustment’ would require careful sequencing and close Centre-state coordination (‘cooperative federalism’), and take several years to implement. As extra resources become available, they could be divided between fiscal consolidation, extra public investment and enabling social expenditures, and UBI (which could be increased gradually in size until it reached the target level).
(iii) The final argument against UBI is that ‘India’s political economy makes it infeasible or ruinous. Powerful lobbies and pressure groups will prevent dysfunctional subsidies being wound up. If UBI were introduced somehow, it would in practice be additional to existing subsidies. There would also be unstoppable demands to increase UBI year after year, a recipe for fiscal disaster’: This is a defeatist position that would negate any attempt at bold reform. Deep fiscal adjustment, in combination with UBI, has the potential to make a huge positive difference to people’s lives, present and future. It should not be taken for granted that India’s democracy is irremediably irresponsible. UBI could serve as a unifying and inspiring idea round which reformers, and the majority of the population, could coalesce to overcome vested interests
PILOT PROJECTS
In 2011, two pilots were launched in Madhya Pradesh, funded by Unicef and coordinated by the Self-Employed Women’s Association, to study the effectiveness of income grants. The results show that people who received the unconditional cash transfers in the pilot did not use it to increase leisure and reduce work. In fact, according to Guy Standing, professor at the School of Oriental and African Studies, University of London, who worked on the pilot, “grants led to more labour and work”, with a shift from casual wage labour to more own-account (self-employed) farming and business activity. There was also a reduction in the migration caused by distress.
In a recent Indian Express article, Maitreesh Ghatak, professor at the London School of Economics, estimates that paying a basic income equivalent to the poverty line, to each and every adult in India, would entail a cost of 11% of GDP, which is way above the 4.2% of GDP that the government currently spends on explicit subsidies. By explicit subsidies, we mean the subsidy cost under the Public Distribution System, fertilizers, railways, electricity, sugar, LPG, kerosene and water, as explained by the Economic Survey 2014-15. Apart from these explicit subsidies, MGNREGS costs 0.4% of GDP. It should be noted that the 4.2% of GDP spent on explicit subsidies does not include spending on education and healthcare. Ghatak points out that the current welfare spending of the government falls way short of the required basic income transfer of around Rs13,400 per annum to each adult.In fact, this has been the main contention over a possible a move towards a universal basic income—the question of whether a shift towards its should be a substitute for all existing subsidies or whether it should complement the existing ones. Noted economists such as Jean Drèze and Reetika Khera have written about the perils of India prematurely moving towards “direct cash transfers”, and removing the existing mechanism of in-kind transfers, best exemplified by India’s food distribution system.
The debate over universal basic incomes (or universal basic shares) is likely to evolve further as the developed world grapples with the possibility of robots taking over jobs and as the developing world wonders how it can pull people out of poverty while facing a resource crunch. Universalising pensions and maternity entitlements is a rare case of consensus among three otherwise-at-loggerheads constituencies. We have a government that wants to scale up “direct benefit transfers”, economists who favour UBI and civil society groups clamouring for universalising these two forms of cash transfers.
By: Abhishek Sharma ProfileResourcesReport error
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