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

India Today - - INSIDE - By Reetika Khera Reetika Khera is a de­vel­op­ment economist based in IIM Ahmedabad

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.

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