Is India Ready For The UBI Scheme?

Despite the rising economy in India, 270 million persons, the substantial population of the country is below the poverty line as highlighted by the latest government data. In the Survey on UBI named ‘Universal Basic Income: A Conversation With and Within the Mahatma’ the Finance Minister is looking at Universal Basic Income scheme as a new tactic to fight against poverty by recycling the numerous subsidies into the fund of UBI.

UBI is a "free money for all citizens, irrespective of their income, to take care of their bare necessities in life.”,  substituting all the the existing subsisides. Thus people will be provided in-cash than in-kind.

MICROCOSM OF UBI IN INDIA

A pilot program of this scheme was launched in 20 villages of Madhya Pradesh in 2011. As Prof Standing said that it had a “remarkable positive” impact on their communities. Villages spent more on their essential necessities like food, medical and education thus bringing out an improved picture of health, nutrition, schooling and sanitation. It also showed increase in economic activities and farmers investing free money in buying seeds and crop cultivation, thus countering the argument that men will spend free money on drugs and alcohols.  

However, applying the same scheme on the entire country will not guarantee the same result considering the radical variants that will make the administration more cumbersome not to mention corruptive too.

Recently, Finland hit the news by launchings UBI scheme for three years to fight against the unemployment. However, Finland and India differ widely with their demography and their socio-economic policies.

This wants us to look through the current impediments in this scheme which are likely not to bring the same desired result as in M.P.

THE PROBLEMATIC ‘UNIVERSALITY’ AND POOR ADMINISTRATION

The drawback of the PDS, MDM, MNREGA etc are the misallocation of resources, barring the needy of their share of fund because of their exclusion error. The basic income scheme boasts of minimum exclusion and inclusion error by being 'universal'. Nevertheless, considering the wide inequality gap in India, this scheme should rather first target the prime beneficiaries, that are the poorest, before being implemented as "universal". The survey is rather suggesting the “target quasi-universality rate of 75%” than strict universality. This is an important point because the radical socio-economic variants in India makes the universality difficult to follow and it would bear expenditure on the GDP.

As Arvind Panagariya said, "Any attempts to broaden the beneficiary base would come at the cost of a reduction in the possible transfers to the poor.” Hence the idea of substituting subsidies with UBI for smooth flow isn't all together such an easy exercise.

Noting the administrative problem in India and the political fall-out, the scheme could as well be bearing leakages, corruption and colossal wastages if implemented without any strictness and upgrade in the administration.

LACK OF FISCAL RESOURCES

The basic income amount proposed for UBI is 7,620 Rupees a year which would reduce poverty from 22% to 0.5%.

But how will the UBI be funded?

The Finance Minister, Mr. Subramanian, has thought of recycling 950 existing welfare schemes (which take up 5% of the GDP) into funding UBI. Thus, attempting to save the unnecessary loss, leakages and time. This would also entail a tremendous cost if it would include a large population of India to rise from poverty.

But, this gargantuan attempt is warned by NITI Aayog Vice Chairman Arvind Panagariya as India's fiscal scale doesn't match up to its requirements.

He says, "The Tendulkar urban poverty line at 2011-12 prices is ₹1,000 per person per month. Due to inflation between 2011-12 and now, at today's prices, this sum would be significantly larger," said Panagariya. "But transferring even ₹1,000 per month to all Indians would cost 15.6 lakh crore (1,000 x 12 months x 130 crore people) a year. We simply do not have this magnitude of fiscal resources."

The survey showed that even the removal of the present welfare programs wouldn't leave that much amount either.

LACK OF BASIC SOCIAL SERVICES

The government first essentially needs to improve its infrastructure and facilities of education, medical and other public places. The government has indeed increased the numbers of these public places but their quality is continually degrading. The survey is proposing to deposit the free money directly into the beneficiary’s bank accounts, thereby reducing the workload of administration

One-third of Indian adults remain unbanked despite government's words of having opened 260 million bank accounts since 2014. According to the World Bank, there are only around 20 ATMs for every 100,000 adults in India, compared with 70 in South Africa. This poor infrastructure will deny many beneficiaries to access their entitlements.

UBI is guarantying people of their basic care needs but if the facilities aren't itself catering to their needs, remaining underdeveloped, an investment in this scheme would only seem unreasonable and waste. The feasibility of the basic income also depends upon the cost of public services.

 An upgrade and improvement in these basic services is sine qua non for the efficient working of the UBI. Otherwise, it would only by a toil on the GDP.

Looking through the current socio- political and economic state of India, it goes without saying that India is not yet ready for this radical move. This idea can bring sustainable human development only when the loopholes in administration and basic amenities like public services are look after and improved.  The idea is still not ripe for India to taste it fruits.

Atiba Sheikh

Content Writer. Blogger.