A Universal Basic Income (UBI) scheme should be introduced for all Indian adults for it to be effective and not only for people who are below the poverty line (BPL), said Guy Standing, Professorial Research Associate, School of Oriental and African Studies, University of London. Standing, who had worked on two pilot cash transfer projects in Madhya Pradesh, said such a scheme would be more feasible for India than many developed countries.
The Economic Survey 2016-17 to be presented on January 31, will delve upon the feasiblity of such a scheme in India, even as Niti Aayog Vice Chairman Arvind Panagariya has argued that India does not have the fiscal resources to implement UBI for all citizens.
Standing said a UBI will be a better anti-poverty programme with minimum leakages compared to the vast range of subsidies currently given by the government. Phasing out subsidies on food, petroleum products, fertilisers and the funds spent on rural employment guarantee would free up resources which can be used to introduce the income transfer scheme.
“In India, there are a lot of subsidies which constitute a large portion of GDP. Fossil fuel subsidies for instance are large and do not directly go to the poor. NREGA and other welfare schemes do not work very well and cost much more. PDS, we have found through our work that in large part of India, many people do not receive it,” Standing told The Indian Express in a telephonic interview.
He said the scheme should be for all adults and not merely for BPL population, to eliminate the risks of identifying the poor and accurate targeting. A UBI should be given individually to all adult men and women. During 2016-17, the Centre estimated its expenditure on subsidies at Rs 2.5 lakh crore, while another Rs 38,500 crore was allocated for rural employment guarantee scheme.
“The idea to start it only for the BPL population doesn’t work very well, because there are identification issues. BPL system takes a long time to measure number of poor people, and there could be changes in composition of the BPL population, as some people may move up and below the poverty line…It just doesn’t work,” he said.
But a UBI for the entire population would cost India Rs 15.6 lakh crore annually. “The Tendulkar urban poverty line at 2011-12 prices is Rs 1,000 per person per month. Due to inflation between 2011-12 and now, at today’s prices, this sum would be significantly larger. But transferring even Rs 1,000 per month to all Indians would cost Rs 15.6 lakh crore (Rs 1,000 x 12 months x 130 crore people) a year. We simply do not have this magnitude of fiscal resources,” Panagariya told The Indian Express in a recent interview.
Standing said the government can start with Rs 500 per month per adult, and will have to find resources either through eliminating subsidies or other means.
Standing has written a book -— Basic Income: A Transformative Policy for India — along with three authors Sarath Davala, Renana Jhabvala of SEWA and Soumya Kapoor Mehta. This book published in 2015 draws from the two pilot schemes in Madhya Pradesh in which men, women and children were provided an unconditional monthly cash payment. Madhya Pradesh pilots showed basic income leading to improved health and nutrition, increase in economic production, he said.
“The starting point for such a scheme would depend upon resources. Desirability of the (UBI) scheme should be established first, even though it can be done in phases…The PDS should be replaced, it is inefficient. But it should be done in phases, not in one go,” Standing said.
However, the presence of a large database of Aadhaar card holders along with the Socio Economic and Caste Census data, means India can effectively direct cash transfer to BPL population. The government would be able to manage the fiscal pressure in case it introduces UBI per family.
In July last year, Chief Economic Adviser Arvind Subramanian argued that a basic income scheme can be tried in the most disadvantaged regions of the country, rather than making it universal to start with.