Sikkim is set to become the first state in India to roll out Universal Basic Income (UBI), an idea that is, like many rights, both unconditional and universal — one that requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens. Sikkim’s ruling party, the Sikkim Democratic Front (SDF), which has decided to include UBI in its manifesto ahead of the Assembly elections later this year and aims to implement the scheme by 2022, has already started the process to introduce the unconditional direct cash transfers.
As an idea, UBI has been hailed by both left-leaning thinkers such as John Kenneth Galbraith as a means of fostering social justice and equal opportunity, as well as those on the right, including Milton Friedman, as a way of restoring individual choice and freedom and reigning in the influence of the state. The 2017 Economic Survey had flagged the UBI scheme as “a conceptually appealing idea” and a possible alternative to social welfare programmes targeted at bringing down poverty.
The idea and its appeal
While India has made considerable progress in bringing down poverty from about 70% of the population at the time of independence to about 22% in 2011-12 (Tendulkar Committee estimates), the effectiveness of the targeted schemes run by central and state governments have always been in question. Studies and government audits reflect the data manipulation and leakages that characterise the system, with the poor and deserving crowded out of BPL card ownership and the rich reaping undeserved benefits. Targeting is seen as being both inefficient and inequitable, a licence for corruption that has spawned an entire industry of middlemen.
UBI envisages an uncompromised social safety net that seeks to assure a dignified life for everyone, a concept that is expected to gain traction in a global economy buffeted by uncertainties on account of globalisation, technological change, and automation. The Economic Survey 2017 devoted an entire chapter to its merits, concluding that “the Mahatma would have been conflicted by the idea but, on balance, might have endorsed it”.
How UBI works
A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work. The five broad features of such schemes are: payments at periodic regular intervals (not one-off grants), payments in cash (not food vouchers or service coupons), payments to individuals, universality, and unconditionality.
Typically, UBI would require subsumption of other subsidies and allowances in order to free up resources so that a particular amount can be directed to people on a periodic basis. The differences among the several models being tried out across geographies relate mainly to the scale of the project, quantum of income, source of funding, and cuts in other transfers.
Several governments have tried out UBI policies. Finland recently concluded a two-year experiment on its effects on unemployed citizens, which commenced in January 2017. Earlier, the government of Ontario, Canada, had announced a plan to test a kind of unconditional income guarantee, and enrolled participants in three areas of the province for a guaranteed income for up to three years. Some cities in the Netherlands have launched municipal-level trials. Barcelona in Spain has tested several potential changes to its anti-poverty programmes, including unconditional cash payments.
Among nongovernmental attempts, two US-based nonprofits have completed pilot studies and are preparing to launch privately-funded basic income experiments on a large scale, according to data compiled by Kate McFarland of the Basic Income Earth Network. The charity GiveDirectly is reportedly working on plans to initiate a 12-year randomised controlled trial (RCT) to test the effects of UBI in villages in rural Kenya. The Silicon Valley nonprofit research lab Y Combinator Research has completed a feasibility study in Oakland, California, and is now finalising the design of an RCT that will involve 3,000 participants in two American states. In September 2018, nearly 600 people signed up for a UBI experiment launched by Swiss filmmaker Rebecca Panian in the northern Swiss town of Rheinau. Participating adults will receive a monthly UBI of 2,500 Swiss francs (about Rs 1.79 lakh) for a year. The project, which is estimated to cost CHF 3-5 million, will be crowdfunded or funded by donations from institutions.
The case of Sikkim
In India, Sikkim would appear to be the ideal testing ground for UBI. It is a surplus power generating state, which exports nearly 90% of the 2,200 MW that its hydel projects produce — ensuring a steady revenue stream that other states typically lack. It has a literacy rate of 98% and a BPL population way below the national average.
Sikkim has indicated that it will do away with most subsidies before launching its UBI scheme. Indeed, subsuming other schemes is seen as an essential prerequisite, given the sheer number of schemes and programmes run by governments in India. The Budget for FY18 showed there were about 950 central sector and centrally sponsored sub-schemes in the country, which accounted for about 5% of GDP by Budget allocation. The top 11 schemes accounted for about 50% of the budgetary allocation — the food subsidy or Public Distribution System (PDS) is the largest programme, followed by the urea subsidy and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). If the states were included, the number of schemes would be even larger.
None of the places where UBI has been tried have levels of income disparity that exist in India. So, while the idea might work in Sikkim, it might not in, say, Bihar. In a draft report released last year, the World Bank suggested reading the policy of basic income “through the lens of ‘progressive universalism’”. The reason for maintaining conditional social assistance is to “prioritize those at the bottom of the [income] distribution”. While this is contrary to the (universal) basic income principle, it is important to pinpoint those “who are the most vulnerable, where they live, and how vulnerable they are”.
According to economist Bhalchandra Mungekar, a former member of Rajya Sabha and the Planning Commission, dismantling centrally sponsored and central sector schemes such as Mid-Day Meal, Pradhan Mantri Gram Sadak Yojana, National Health Mission, Pradhan Mantri Awas Yojana, Sarva Shiksha Abhiyan, MGNREGS, and PDS could be counterproductive. The Mid-Day Meal scheme offers hot, cooked meals to more than 150 million schoolchildren upto Class 8 every day across the country, while the MGNREGA gives, on average, 60-70 days’ employment annually to about 200 million unskilled persons from 45 to 50 million rural households — 50% belong to SC/ST groups, and one-third are women. Replacing these with cash transfers could be counterproductive, warn critics.