UBI Promise For Voters; Where’s the Money?

New Delhi: It’s the season of populism and largesse in India as the 17th general election approaches. And Congress president Rahul Gandhi has stolen the thunder over the rest with his announcement of Universal Basic Income (UBI) scheme if voted to power.

Gandhi has not announced the broader contours of the programme made at a rally in Chhattisgarh, but according to party insiders it could be a quasi-basic income scheme, meaning the intended beneficiaries would be the poor and the farming community.

Nonetheless, Congress has blunted the edge of the Narendra Modi Government in the electoral battle filed as speculation is ripe that the latter is readying with a similar proposal, the announcement of which could be made in the interim budget.

But will UBI, which borders on an utopian economic concept, ever succeed in India, given the sheer size of the country and the burgeoning population. Reactions are mixed.

Finland was the first country to adopt it, but even with a small population, it could not sustain it, as the programme proved too costly. Kenya is the other country which is experimenting with the scheme, launched about 13 months back, christened ‘GiveDirectly’. Its success could be gauged only after a certain amount of time, but some studies have said that it has helped people.

These two countries, however, are no match for India with its inherent contradictions and complexities. Speaking to news portal Quartz, Gopal Krishna Agarwal, BJP spokesperson, lashed out against the idea. The government had looked at the issue of a basic income in 2014 but realised that even if all subsidies were eliminated, it would provide only enough funds to pay Rs 6,000 per family per month which will not be enough, said Agarwal.

UBI was first mooted in the Economic Survey of 2016-17.

In a column in news portal The Wire, researchers at the New Delhi-based Centre for Equity Studies Kinjal Sampat and Vivek Mishra had tried to estimate the burden on the exchequer. As per their calculation, if the total expenditure of Rs 3.62 lakh crore of the central government for the welfare programmes is allocated for the population below poverty line, every person will be entitled to Rs 12,669 annually, which is lower than the minimum wages legally guaranteed.

Now, if this scheme is made quasi-universal in nature and expanded to 75 per cent of the population, every person will only be able to get Rs 4000 a year. Else, the expenditure outlay for the scheme will have to be increased four times to Rs 11,50,00 crore which may take a toll on the government’s budget.

The Seventh Pay Commission has fixed the minimum monthly salary of a junior most government employee at Rs 18000. Assuming that it is family income that we are talking of, logically, the bare-minimum standard of living for the government employee should also hold for every other citizen.

Can India sustain it?

Hindustan Times quoted welfare economist Jean Dfeze saying that “replacing crucial hard won entitlements such as subsided food could be a trojan horse for the dismantling of hard-won entitlements of the underprivileged”.

Proponents of UBI such as economist Pranab Bardhan, professor of economics at University of California, Barkeley and Vijay Joshi, emeritus fellow at Merton College, University of Oxford have proposed that the main way to finance UBI is to cut so called non-merit subsidies that do not go into education and health and directed at non-poor.

But some analysts argued that it was unlikely any government would take that risk. Earmarking a separate budget backed by statute for UBI could be an option, but that would add to the expenditure and widen the fiscal deficit gap.