The Economic Survey 2016-17 indicated that the much talked about issue of universal basic income (UBI) deserves a careful examination by the country, though it may not be the right time to implement the scheme.
It, nevertheless, in its conclusion, indicated that if the macroeconomic stability of the country can be ensured given that exiting from such programmes is difficult, it may get a go-ahead. “UBI’s appeal to both ends of the political spectrum makes it an idea whose time has come perhaps not for immediate implementation but at least for serious public deliberation,” noted the Survey and was also reiterated by chief economic adviser Arvind Subramanian in his press conference.
The concept of UBI aims to provide a fixed monthly pay to individuals based on their citizenship of the country. The move, aimed to wipe out poverty in the country, will bring down the poverty level to 0.5% in the country but will cost 4-5% of the gross domestic product, according to the Survey. From 70% at the time of Independence, India’s poverty has come down to 22%.
Though the contours of the scheme are still not finalised, the idea is for UBI to replace all subsidies and provide cash direct benefits to individuals to push them out of poverty. Invoking Mahatma Gandhi, the Survey said, “The Mahatma would have been conflicted by the idea but, on balance, might have endorsed it.”
The success of the scheme, however, hinges on the efficiency of JAM (Jan Dhan, Aadhaar and mobile) and if a cost-sharing agreement can be reached among the Centre and the states.
Listing the upsides of the scheme, the Survey noted it will lead to poverty and vulnerability reduction, provide the freedom of choice, lead to better targeting of poor, provide cushion against natural and health shocks, and improve administrative efficiency, among others. It, however, points out that though Aadhaar can solve the identification problem, it may fall short in terms of targeting.
The arguments used against the concept include male members may have a say on the income received and women may be disadvantaged, lead to stress on the banking system and reduction in purchasing power as beneficiaries will be exposed to market prices, among others.
The Survey points out that implementation challenges are the greatest as there are about 950 central schemes and centrally-sponsored sub-schemes costing around 5% of GDP but they show signs of misallocation.
It shows that often the districts with the highest number of poor are allocated lower amount of funds, leading to inequitable distribution of benefits and also leads to exclusion of deserving beneficiaries.