Whether time is ripe for Universal Basic Income in India

Universal Basic Income (UBI) is a paradigm shift in thinking about social justice and social welfare. UBI provides a minimum basic income to all. UBI, by its very name ought to be unconditional and universal. It requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens. 

Even after 70 years of independence, India still has 22% of its population below the poverty line as per Tendulkar poverty line. The basic premise for UBI is that it helps to remove poverty due to unconditional cash transfer, plug leakages due to direct benefit transfer, fix inclusion exclusion errors due to universality and lead to women empowerment by transferring amount in the name of women of the household. Our current social sector schemes like MGNREGA, Food Security Act, Mid Day Meal scheme, Public Distribution System(PDS), fertiliser subsidies suffer from leakages and identification of beneficiaries.

But is UBI coming at the cost of these social sector schemes ? If yes, then I am skeptical about this scheme. Though there are issues in these schemes, UBI cannot replace these schemes. For example, take the case of Mid Day Meal scheme. This scheme has helped us to achieve near universal enrolment and improved child nutrition. Also, if money is directly transferred to the beneficiaries, what is the guarantee that poor people would send their children to schools. Similarly, if PDS is abolished, it can lead to transferred money being spent on alcohol or gambling. Moreover, free rewards can be seeing as harming responsibility and effort.

Second question is whether UBI is feasible ? UBI would have huge costs to the exchequer if it is implemented universally. If you are transferring just Rupees ten thousand per yer, it won’t be of much use to the poor. But given the huge population, even this amount would be difficult to give. On the other hand, if we providing UBI scheme to only a proportion of population, then it is not universal. In that case, it would have problems of beneficiary identification and targeting.

UBI should actually provide minimum basic wage. But the “actual” minimum wage in India is Rs 4,800 per month. Could we expect at least this amount from UBI ? The answer is no. There seems to be a broad consensus around the Tendulkar Committee poverty line, which works out to be around Rs 12,000 - 15,000 per year. But even this modest figure is estimated to cost around 11–12% of GDP, whereas all the current subsidies put together cost around 4–4.5% of GDP. This indicates the non-feasibility of UBI in India, at least in the universal sense.

So, yes I want UBI, but not at the cost of existing social sector schemes at the present moment. Due to out huge population and current fiscal conditions and hence low amount of UBI, UBI can only supplement the income of India’s population which would increase consumption and hence stimulate the economy. 

As a start, we can offer UBI as a choice to beneficiaries to existing schemes. This way, it would have less fiscal costs. It gives people not only greater choice, but also greater negotiating power with the administrators who are currently supposed to be giving them benefits. For example, in case of PDS, a dealer knows if he siphons off ration, he faces the threat of exit from the beneficiaries, who would switch to UBI. Designed in this way, UBI could improve the implementation of existing schemes. The only issue is that this would be administratively cumbersome. 

Another way to start off is that to provide UBI initially to some targeted groups like women or widows or old people etc. These are easily identifiable. 

 So, time is not yet ripe to have UBI as a replacement to the existing social sector schemes. But given the fiscal costs of addition of UBI, we can't approach it universally. To overcome this challenge, we can provide UBI as a choice to existing schemes or have it targeted to some easily identifiable groups of individuals initially. UBI should be approached in a phased manner.