Why not offer basic income to all?

The unwieldy subsidy regime can be done away with and the savings thus made can be directly passed on to the needy in the form of cash

ashishm

Ashish Mehta | January 7, 2019 | Delhi


#economic survey   #GDP   #Arvind Subramanian   #income   #UBI  


Universal basic income (UBI) has been the buzz in policy circles since global downturn. Arvind Subramanian, former chief economic adviser to the finance ministry, championed the idea and devoted a full chapter to it in the Economic Survey of 2016-17. UBI is considered the mother of all social welfare schemes, and curiously it has supports on either side of the left-right ideological divide (though also critics on both sides).

In essence, UBI promises a fixed amount of income to one and all. Why one and all (universal)? Because fixing any parameter and identifying beneficiaries may lead to imperfections, though many votaries are open to fixing a criterion like those below the poverty line, or to all minus the taxpayers. (In today's political scene, it could be all farmers - like Telangana model at large, see page 30, and outdo oothe calls of loan waivers.) Why give away money? Because it will not stay idle in the hands of the recipient, he or she will go and spend it, presumably on necessities, and this spending will keep the economy moving. How to fund it? Now, that’s the big question.
 

Think

UBI, or giving fixed amount of income to every adult, is the ultimate safety net championed by the left and the right
. . .
The unwieldy subsidy regime can be done away with and the savings thus made can be directly passed on to the needy in the form of cash

Those championing it from the right-wing of economic thinking favour doing away with all subsidies, from PDS to fertilizer which all involve a lot of leaking, and instead give cash handouts to the needy. They use the concept of UBI to argue for dismantling the messy and inefficient subsidy regime. Those on the left favour the UBI as all-weather safety net, especially for the marginal sections who crisscros the poverty line through cycles of boom and bust. Some of them also favour doing away with all subsidies and giving hard cash straight to the neerdy.
 
In precise numbers, the case is well presented by economist Vijay Joshi of Oxford. As summarized in our cover story of February 1-15, 2017, it goes thus: If the universal basic income is Rs 17,500 a year per household (five members), it would cost 3.5 percent of GDP. Now, look at subsidies. A 2003 study by the National Institute of Public Finance and Policy (NIPFP) found that ‘non-merit subsidies’ were 7.7 percent in 1998-99. (‘Non-merit’ subsidies exclude ‘merit’ subsidies, meaning schemes relating to education, health, nutrition, environment, rural development, roads and bridges and urban development.) Ending even half of the non-merit subsidies will get enough funds to launch UBI.
 
But ending the subsidies is difficult. Politicians think they will lose votes if cheap, rationed food grains or subsidised fertiliser are stopped. No matter what you may give to them instaed.
 
However, there are other options to generate funds. Joshi mentions PSU privatisation and taxing agricultural income (see Page14). Also think of all the indirect tax breaks to the corporate sector in every budget, justified only in the name of helping companies create jobs. Apparently, they are not creating enough jobs. Ending those tax breaks will be a cheaper option, politically speaking, to get enough money to launch UBI. Then, there’s the controversy about the government eyeing the central bank’s reserve funds… consider that also as an option.
 
UBI is the kind of move that will grant long legacy to any prime minister. It will be a sure game-changer in any election.  
 
Reality check
UBI requires intricate planning, especially in deciding the range of beneficiaries. If it is to be funded by removing existing subsidies, it will be one of the boldest decisions in India’s history. If subsidies are not touched, its math becomes unmanageable. A limited version, however, is feasible and – who knows – may be round the corner. 
 
(This article appears in January 15, 2019 edition)

Comments

 

Other News

Pahalgam and after: Is India preparing to hit Pakistan hard?

India, boiling in anger after the brutal killing of 26 tourists in Pahalgam in Jammu and Kashmir by terrorists belonging to `The Resistance Front` (TRF), an offshoot of the Pakistan-based Lashkar-e-Taiba, is preparing for a major offensive against the perpetrators and their handlers across the border. A st

After Pahalgam: “All forces to maintain high vigil”

Recognizing the seriousness of the Pahalgam terrorist attack this week, India has sent out a strong signal to Pakistan to stop supporting cross-border tourism by taking a number of steps including suspending the Indus Water Treaty. The Cabinet Committee on Security (CCS), which is chaired by

How Ayurveda and Yoga can help heal common ailments

Healing Revolution: Defeat 100 Ailments with Ayurveda, Yoga and Lifestyle By Ram K. Sharma Rupa Books, 272 pages, Rs 395

Green cities: A pathway to sustainability

As the world observes Earth Day on April 22, the imperative for sustainable urban development has never been more pressing. Urban areas contribute approximately 70% of global greenhouse gas (GHG) emissions (UN-Habitat Report, 2023). In India, the urban population is projected to reach 800 million by 2050 (

A unique way of looking at nature, at people, at life itself

Another Day in Landour: Looking Out from My Window By Ruskin Bond HarperCollins, 220 pages, Rs 399 Landour is a q

‘Better than the entire world’: Here’s the ‘India book’ for ages

The Undying Light: A Personal History of Independent India By Gopalkrishna Gandhi Aleph Books, 624 pages, Rs 999 Vet

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now



Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter