Universal basic income on paper is different from universal basic income in India. Hence, here is some context.
Moving away from the idea of having a smartphone manufacturing unit in every constituency of the country, Rahul Gandhi, president of the Indian National Congress (INC), promised (not proposed) a minimum universal basic income for poor people in the country, if the party was voted to power in the Lok Sabha elections of 2019.
Addressing a farmer rally in Chhattisgarh, Gandhi spoke on how the beneficiaries will have a certain amount credited directly to their bank accounts. Conveniently discarding the scores of countries where the primary income programme has already been tested in some capacity, he went on to say that India will be the first country to inculcate this in its governance.
Without divulging any further details, Rahul Gandhi went back to the Congress party slogan since decades and concluded by saying that with the programme in place no one will continue to remain hungry or poor.
The idea of universal basic income (UBI) was first proposed in the Economic Survey of 2016-17. Played out as a conversation with Mahatma Gandhi, the report addressed the moral conflict that could arise by helping a citizen with an income without them being involved in any laborious activity. However, the other Gandhi in his speech oversimplified the idea and made UBI sound like some sort of cash reward that the government can hand out to citizens based on their social status. What is lacking in the articulation of the policy measure is a discussion on the underlying philosophy, the financial and the social implication and more importantly, the feasibility of implementing the idea.
Let us begin with the philosophy. As reported in the Economic Survey, the idea of UBI is to impart every citizen with a minimum income to pass the test of justice. Seen as a tool to eradicate poverty, inequality, and as a facilitator for efficiency in government transfers, UBI hinges on the idea of reducing the governmental relations between the state and its citizens, but with many terms and conditions. When this idea was first proposed a couple of years ago, the schemes under the Government of India (GOI) were just starting to address the barriers of monetary leakages, redundant beneficiary lists, and corrupt intermediaries.
Now with the JAM trinity of Jan Dhan Yojana (bank accounts), Aadhaar linkage, and mobile connectivity in place, these leakages have been curbed to the extent of saving the current GOI more than Rs 90,000 crore until the end of the last financial year. While the Economic Survey cited the misallocation of resources in government schemes as one of the reasons to adopt the UBI programme, the efficiency of the JAM trinity negates this perspective.
For the annual budget of 2016-17, over 950 schemes directly or indirectly under the central government, accounted for roughly 5.2 per cent of the gross domestic product (GDP). Of this 5.2 per cent, close to 20 per cent was the food and kerosene subsidy, and 10 per cent was equally distributed amongst the urea subsidies and MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act).
The PDS (public distribution system) food and kerosene scheme, MGNREGA, Sarva Shiksha Abhiyaan (SSA), mid-day meal (MDM) scheme, Pradhan Mantri Gram Sadak Yojana (PMGSY), Pradhan Mantri Awas Yojana (PMAY), and the Swachh Bharat Mission (SBM), LPG subsidy, urea subsidy, National Health Mission, and schemes under Integrated Child Development Services accounted for more than 50 per cent of the spending. Thus, out of 950, these 11 schemes accounted for over 50 per cent of the government spending.
This is where a conflict arises. Providing UBI would leave the beneficiaries free to source their ration, urea, health services, and other social amenities. While the state will continue to have a role, it would not be possible for any government to conduct expenditure on two fronts with efficiency.
Therefore, for UBI to be implemented, the above schemes will have to go. Yes, given that the money will be directed to the bank accounts there would be negligible occurrences of leakages, but it will come at a hefty cost for the same beneficiary for they shall no longer be insulated to market shocks and fluctuations.
The Economic Survey of 2016-17 elaborately deliberated on the misallocation of resources, citing how some of the poorest districts in the country faced the most significant shortfall of resources allocated under government schemes. For instance, only 20 per cent of the funds under the MDM scheme were allocated to the backward districts hosting 40 per cent of the poor. Thus, UBI was expected to solve the problem of surplus and shortfall of resources by enabling a level-playing field by directing incomes to the bank accounts.
This is where the role of the state comes into play. In the past, most government schemes have suffered due to leakages and resource allocation. However, with data intelligence and thorough monitoring, the problem of resource allocation can be solved. If the government can save more than Rs 90,000 crore via direct benefit transfers (DBTs), there is no uncertainty about improving resource allocation in the future with data intelligence. Having UBI to solve this problem is having a disproportionately complex solution for a simpler problem.
The next problem is of targeting. There is nothing universal about the UBI programme, for even the survey discusses helping the bottom 75 per cent of the population with a minimum income which is over 800 million people. Therefore, even with his heart at the right place, the Congress president cannot ensure that the list of beneficiaries is prepared correctly. However, assuming his government uses the JAM model to filter out the recipients, what would the criteria of inclusion be?
Calculated for inflation, the proposed annual minimum income in the 2016-17 survey was Rs 7,620 for 75 per cent of the population. This accounted for 4.9 per cent of the GDP against the GOI expenditure for 950 schemes that accounted for 5.2 per cent of the GDP. This is where the next problem lies. Assuming the Congress government sanctions an annual figure of Rs 12,000 per citizen from the year 2020-21, amounting to Rs 1,000 per month, or Rs 5,000 per household (average), the next challenge would be to insulate the population against price shocks for it.
Clearly, with more liquidity in the system, the prices for food commodities shall rise. However, they might also lead to fluctuation in the prices of other commodities like urea. Thus, many currently eligible beneficiaries might be left out of these schemes, even with a disposable income in hand. Also if the citizens were to choose between UBI and existing government schemes, the problem of targeting would occur, leading to the issue of resource allocation.
Lastly, what would be the ideal figure for an annual income and how will it be adjusted for inflation, and where does it leave the role of the state? Would the government allow itself to run into a fiscal deficit in double digits by dual spending on government schemes and UBI?
UBI, in its core, is about liberating the individual from governmental control. However, for a country like India where universal healthcare, education, and financial inclusion are relatively newer concepts, the idea must wait. With Jan Dhan, the government is gradually moving towards personalised credit growth. With Ayushman Bharat, the government is moving towards personalised and preventive healthcare programmes. These are long term goals for the government.
The current tenure of the GOI shall be remembered for the social upliftment that happened due to the curbing of monetary leakages and critical government schemes like SBM, JAM, and Ayushman Bharat. At Rs 5,000 per month, can a household be expected to substitute the benefits they are getting through 950 odd schemes, and the insulation that they have against market shocks?
Handing out cash rewards may seem to be a liberating idea, but it leaves the state without any accountability. The concept of UBI is not one that can be discarded without debate, but one that is way ahead of its time in India. There is a need to deliberate more on it before making grand announcements.