THE POLITICS OF UBI
By proposing to ‘target’ beneficiaries, the proposed variants of a Universal Basic Income become oxymorons, and they are hard to implement
It’s budget season in an election year. No wonder the idea of a ‘Universal Basic Income’ (UBI), with its all-too-obvious surface appeal, is getting a thorough airing: from Rahul Gandhi’s attentiongrabbing announcement of a ‘minimum income support’ for the poor to Sikkim’s announcement a fortnight earlier that it would become the ‘first state to roll out UBI’.
The two key principles of UBI are ‘universal’ coverage and an entitlement to a ‘basic income’, to enable dignified living in the absence of other earnings. For its votaries, a big part of its appeal lies in the fact that UBI sidesteps the messy and flawed process of identifying beneficiaries. The oxymoronic variants such as a ‘targeted universal basic income’ or the Congress’s ‘minimum income support’ for the poor—walk right into the targeting trap UBI is supposed to avoid by making the cover ‘universal’. This tailoring is done to get around the vexed question of affordability. Any amount that might even vaguely qualify as ‘basic income’ would be unaffordable on a universal scale because it would be next to impossible to create the necessary fiscal elbow room.
One such proposal is former Chief Economic Advisor Arvind Subramanian’s ‘Quasi Universal Basic Rural Income’. At Rs 1,500 per month per family, for 75 per cent of the rural population—requiring an outlay of 1.3 per cent of GDP—it’s neither universal, nor basic. Economist Vijay R. Joshi’s proposal of Rs 3,500 per person per year (at 2014-15 prices) would cost more (3.5 per cent of GDP) and still fail to guarantee a basic income. Both proposals require creation of fiscal space: say, by winding down the fertiliser subsidy or crop insurance etc.
Besides its unaffordability, UBI faces the question of equity: should I get the same amount as, say, a rural widow? And if indeed fiscal room can be created, aren’t there arguably better uses for it—directing it towards primary healthcare, for example? Another serious concern is that inflation can erode the value of the transfer. And the experience with inflationindexing, the obvious workaround, has been disappointing. For instance, the central contribution to old-age pensions has been stuck at Rs 200 per month since 2006! Similarly, in the name of indexation, NREGA wages were raised by Re 1/day in Jharkhand in 2017.
There is, in fact, a workable alternative plan, recently sent up to finance minister Arun Jaitley: to raise the central contribution to social security pensions from the frozenin-time Rs 200 p.m. to Rs 500, along with universal maternity entitlements of Rs 6,000 per child for women in the informal sector. That would account for most working women as less than 10 per cent of the workforce is in the formal sector, where maternity entitlements are fairly generous. The plan has the support of over 60 economists, proponents of UBI included. Even if pensions were universalised at Rs 1,000, it would still cost less than 1 per cent of GDP.
The proposal is better than the so-called UBI on several counts: one, it is a financially viable universal transfer. The target group— all elderly, single women (including widows), persons with disabilities and pregnant women—is well identified. Besides being affordable, it steers clear of the flawed and fraught task of identifying beneficiaries. Pensioners and young mothers are among the most vulnerable demographic groups. And the proposal scales up without displacing any existing form of support. Other UBI proposals require either ‘restructuring’ or discontinuing ‘non-merit’ subsidies. Incidentally, the government’s Pradhan Mantri Matrutva Vandana Yojana (PMMVY) violates the provisions of the National Food Security Act (NFSA) 2013, which mandated Rs 6,000 per child; the PMMVY has cut this entitlement to Rs 5,000 for the first child only.
Rahul Gandhi’s announcement is welcome only to the extent that it is the first substantive proposal ahead of the upcoming elections. What is urgently needed, though, is to fix the existing social security pensions, maternity entitlements, NREGA wages etc. That would be to put money where their mouth is.