UBI: The devil is in the detail

An exclusive reliance on Aadhaar-linked welfare payments is short-sighted, observes Carnegie analyst

GN Bureau | February 16, 2018


#IMF   #Universal Basic Income   #International Monetary Fund   #UBI   #Carnegie  
Representational image
Representational image

Instituting Universal Basic Income (UBI) requires public support spanning demographic lines, executive backing, and strong macroeconomic fundamentals. Weaken any leg of this tripod, and the redistributive preferences of any government may shift in favour of traditional welfare support and focusing on economic growth. And even if an experiment were to yield spectacular results, the financing question is the key, said a Carnegie India analyst.

Saksham Khosla writes that if practicalities dictate that India’s tenuous social protection framework be sacrificed at the altar of a basic income, then it would turn quickly from manna from heaven to actively undermining the Indian social contract.

None of the objections form “an insurmountable obstacle toward one day implementing a clean, well-designed UBI that simultaneously empowers Indian citizens and strengthens the Indian state. Some of them may even lose their edge if India can fill the evidence gap around such policies and build administrative muscle by recasting its systems of public financial management and tax collection, with accompanying reforms to boost digital payments and financial inclusion”, said the report titled India’s Universal Basic Income: Bedeviled by the Details.

The idea of a universal basic income (UBI)—periodic and unconditional cash payments to all citizens—has gained renewed attention amid growing concerns about technological unemployment in advanced economies. More recently, economists have made the case for a UBI in the developing world, where cash transfers distributed to all citizens, rich and poor, may cut through layers of red tape and lead to outsize gains in poverty reduction.

He said that in India, a rapid expansion of direct cash transfers linked to the national biometric database and small basic income experiments have galvanized an extensive debate on a UBI. Supporters claim that no-strings-attached payments will be an effective antidote to India’s underperforming antipoverty programs and leaky, distortionary subsidies. Critics worry that they will undermine an-already-fragile social security architecture, cause workers to drop out of the labour force, and encourage wasteful spending.

Read |  Universal Basic Income: The big idea takes tiny steps

Finance ministry’s 2016–17 Economic Survey provides the most exhaustive treatment thus far of implementing an Indian UBI. It finds that India’s largest welfare schemes are poorly targeted; in comparison, it argues that a UBI distributed directly into bank accounts will limit pilferage, be easier to administer, and prove a more effective antipoverty intervention.

The Carnegie report goes on to say that the proposed transfer is less an income and more an income supplement. The Tendulkar line has been criticized for being too conservative an estimate of consumption and expenditure. The Economic Survey’s calculations incorporate neither the loss of consumption from withdrawing major existing welfare programs to finance a UBI, nor the transaction and transition costs of moving to a welfare system dominated by cash transfers. Taking these factors into account is likely to result in an upward revision of the transfer amount and associated fiscal burden.

The survey is unjustified in presenting India’s largest welfare schemes as candidates for replacement. Several such programs are intended to achieve long-term development goals and cannot be simply substituted by cash transfers. In addition, India’s national food distribution and public works programs, which the survey singles out for their high levels of misallocation and leakage, have improved significantly over the past decade in terms of their coverage and targeting efficiency.

By discarding universal coverage, the survey leaves the door open for inefficient means-testing. Targeting performance can vary quite widely, and any savings generated thus can be offset by high administrative, private, social, and political costs. If targeting must be instituted, universal transfers among clearly defined vulnerable groups offer a tentative answer to this dilemma.

“An exclusive reliance on Aadhaar-linked welfare payments is short-sighted. Pilot evaluations of direct benefit transfers have found significant room for improvement in last-mile delivery, the size of the subsidy, and grievance redressal, even as authentication failures and exclusion errors due to Aadhaar persist. Significant progress remains to be made before large-scale Aadhaar-linked transfers can be trusted to reach recipients,” writes Khosla.
 

Comments

 

Other News

TRP-driven model bred irresponsibility: Sudhir Chaudhary

News profession is organic in nature, requires responsibility and discipline, and there is no room for mistake. To maintain high standards of accuracy you need discipline and hygiene in the newsroom. Sudhir Chaudhary, editor in chief of Zee News, Zee Business and Wion, has said that a TRP-driven business m

This Mumbai NGO empowers children with skills

When Dharmendra Pandey, a fruit-seller had to leave Mumbai after the imposition of the lockdown during the Covid-19 pandemic, and return to his village in Uttar Pradesh, he was staring at economic uncertainties ahead. Little did he know that his 16-year-old son, Mahavir, had acquired skills that would come

Masks: Awareness: near-total, compliance: half-way

Wearing a face mask is the first line of defence against the novel coronavirus, along with maintaining social distance and frequently washing hands with soap. More than six months after the outbreak of Covid-19, nearly 90 percent of people in India have become aware of the necessity of wearing a face mask,

Covid-19: Daily recoveries cross 1 lakh mark, new cases far fewer

Is India finally gaining an upper hand over the Covid-19 pandemic? After weeks of new cases hitting 90,000-plus every day, the tide seems to be turning, as the number came down to 75,083 on Tuesday, and the recoveries were not only higher than that but crossed the 1 lakh mark too. The countr

A travelogue of an inner pilgrimage

Sit Your Self Down A Novice’s Journey into the Heart of Vipassana By Gayatri Jayaraman Hachette India, 212 pages, Rs 399   As stress and strife increase in daily life, more and more people are turning to meditation as an all

Vote in the time of Covid: EC hosts global webinar

On completion of one year of the chairmanship of the Association of World Election Bodies (A-WEB), the Election Commission (EC) of India on Monday hosted an international webinar on the theme of “Issues, Challenges and Protocols for Conducting  Elections during COVID-19 : Sharing Country

Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter