Halting the welfare state

Universal Basic Income (UBI) could replace Central schemes which have many socio-economic benefits.

Written by BHALCHANDRA MUNGEKAR | Published: March 28, 2017 12:00 am
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After taking the most irrational decision — demonetising high-value currency notes, accounting for about 86 per cent of the total notes in circulation, a move that caused terrible hardships to common people for nearly three months, impacting the economy but not the black economy — the government is now contemplating introducing Universal Basic Income (UBI) for all citizens.

In Chapter Nine of this year’s Economic Survey, under the title “Universal Basic Income: A Conversation With and Within the Mahatma”, the government has spelt out the UBI’s philosophy, saying that “a just society needs to guarantee to each individual a minimum income which they can count on, and which provides the necessary material foundation for a life with access to
basic goods”.

This could indeed be the most innovative, laudable idea, not only for India but for the whole world as it embodies the “essence” of human activity, that is, earning one’s livelihood. After delineating the UBI’s philosophy,
rationale, logistics and feasibility, the ES boldly states that “it is a powerful idea whose time… is ripe for serious discussion.” Hence, this attempt at the same.

First, it is ridiculous to invoke the Mahatma while intending to initiate the scheme, and more so, during its implementation, for achieving “macro-economic stability”, Gandhiji being a “fiscal conservative”. Those who are even peripherally acquainted with “Gandhian economics” would know that in the Mahatma’s scheme, the human’s material needs should be a bare minimum; these needs are to be fulfilled through one’s physical labour; the owners of property must act as “trustees” of the people and use as much property to only to satisfy their needs; machines should be controlled by humans and not the other way round; no poverty, no inequality, no tensions, no conflicts. Even his celebrated idea of antyodaya (the rise of the lowly) would entail that, in time, there would be perfect parity amongst all. This will ensure that society would live in harmony and self-perpetuating social equilibrium.

Lastly, if Karl Marx visualised the “withering away of the state” in the transition of society to a mature “communism”, the Mahatma believed in a society “without state”, to begin with. Thus, the Mahatma would not have visualised any of what is spelt out in the said chapter on the government’s alleged conversation with him.
The UBI scheme has three components: First, universality, that is, all individuals, by virtue of being citizens, will be assured basic (minimum) income to ensure that everyone lives a life of dignity, minimising the chances of falling below the poverty line. This would also avoid “errors of omission” (meaning that the deserving shall not be omitted),
as happens in the case of most targeted welfare schemes.

Second, unconditionality, implying that there shall be no condition, including one’s level of income, to access this scheme. Third, the government’s thinking weakens the relationship between employment and access to certain basic income; though the ES categorically argues that “all societies must aim for full employment”, it maintains that “in the 21st century it may no longer be possible to guarantee social security or minimum support by linking it to employment”. Lastly, basic income is to be transferred to citizens in the form of cash.

As the ES spells it out, the “powerful” idea of the UBI shall have many objectives, such as securing social justice, reducing vulnerability, giving dignity to citizens, curbing poverty, creating flexibility in the labour market by giving work choices to individuals and creating employment, greater administrative efficiency, financial inclusion and so on. Thus, the UBI is expected to be the most innovative, indeed, revolutionary scheme since Independence, achieving almost all socio-economic goals at one go. For this, beside the Mahatma, Nobel Laureate John Rawls, Tom Paine and, surprisingly, even Jawaharlal Nehru are invoked to seek philosophical justification for the scheme.

Be that as it may, let me now turn to the financial aspects of the UBI. On the basis of the Tendulkar Committee poverty line, a sum of Rs 7,620 per person per annum is considered adequate to keep a human being above the poverty line. (This is arrived at by treating Rs 893 per month per person as base line poverty in 2011-12, multiplied by 12 months, yielding an annual income of Rs 5,400, which is adjusted against inflation during 2011-12 to 2016-17). Now, in view of the financial burden and treating only the bottom 40 per cent of the population as needing the benefits of UBI, the remaining 60 per cent kept outside its purview, the ES gives a quick goodbye to “universalility” and settles at “quasi-universality”, where it considers only 75 per cent of the population, including, as the ES
discusses, 35 per cent non-poor population. This would cost 4.9 per cent of the GDP.

Now, what is striking about the UBI scheme is that it will replace all other Centrally sponsored and Central sector schemes such as Mid-Day Meal (MDM), Pradhan Mantri Gram Sadak Yojana, National Health Mission, Pradhan Mantri Awas Yojana, Sarva Shiksha Abhiyan, MGNREGA, PDS and so on. Will dismantling these schemes really compensate for their present benefits, once these are converted into direct cash transfers? For instance, the MDM offers hot, cooked meals to more than 150 million school children upto class eight per day across the country. The MGNREGA gives, on average, 60 to 70 days employment annually to about 200 million unskilled persons in 45 to 50 million rural households — 50 per cent belong to SC and ST groups and one-third are women. The dismantling of the PDS will adversely affect the bottom 50 to 60 per cent of poor consumers spending relatively more on food by paying higher prices; the suspension of procurement of rice and wheat at guaranteed minimum support prices will mostly result in the collapse of their market prices due to the bargaining power of traders vis-à-vis farmers.

Second, it must be noted in this context that the top ten of these schemes (excluding food, fertiliser and petroleum subsidies) accounted for only 1.4 per cent of GDP in 2014-15, and the remaining 940 odd sub-schemes, for an additional 2.3 per cent of GDP, totaling 3.7 per cent of GDP. Third, though it would be naïve to neglect the shortcomings of the schemes in fulfilling intended goals, due partly to their design and mainly to their faulty implementation, as evidence shows, over time, their implementation is improving: It could be further improved if the nexus between the political class and the bureaucracy at all levels is broken; greater participation of the people, particularly of women and their organisations in the implementation of these schemes is secured; and public accountability of all those involved from start to end is strengthened. It is both the constitutional and moral responsibility of the government to ensure this with a strong political will. Dismantling the “welfare state”, through converting “public” and “quasi-public” goods into money due to the lack of political will, in a poverty-struck and highly unequal country like India, must be unacceptable.


The writer is a former member of the Rajya Sabha and the Planning Commission  

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  1. I
    Mar 28, 2017 at 5:30 pm
    All these government schemes are so prone to corruption that the poor don't get their due. UBI with cash directly deposited in verified accounts is a much better approach. This author needs to get his head out of the sand
    1. K
      K SHESHU
      Mar 28, 2017 at 2:27 pm
      The welfare schemes are being slowly terminated to supply incentives to corporates
      1. A
        ak dev
        Mar 28, 2017 at 1:51 am
        Author wanted something to rant. Modi-haters are having hard time to find matters to criticize government.
        1. A
          Mar 28, 2017 at 8:06 am
          They claim to b economists but don't even know how to multiply.
          1. g
            Mar 28, 2017 at 7:25 am
            The country has seen many poverty removal schemes, but none of the schemes could remove poverty. Of course, many schemes with its leakages, have made the rich to richer. Any possible scheme to plug the loops is always welcome
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