UBI in Sikkim: Cham­ling’s Chimera

Uni­ver­sal Ba­sic In­come awaits fis­cal ca­pac­ity

The Economic Times - - The Edit Page -

Ide­al­ists have long pro­posed a Uni­ver­sal Ba­sic In­come (UBI) for all, a div­i­dend for sim­ply be­ing a cit­i­zen. No coun­try has yet im­ple­mented this whole­sale, though many have pi­lot projects. Now Sikkim chief min­is­ter Cham­ling says he will pro­vide a UBI to all 7 lakh state cit­i­zens by 2022 if elected. He says he will tap the sur­plus funds the state gets as its share of mas­sive cen­tral hy­del projects of 2,200 MW, which will soon rise to 3,000 MW. Sikkim’s own needs are only 200-300 MW. Be­fore cheer­ing, ide­al­ists would do well to study Sikkim’s fi­nances.

Its Medium Term Fis­cal Plan, 2017-18 to 2019-20, says that its fis­cal deficit is still as high as 2.79% of GDP de­spite the power boom. In­deed, it says that its sharp rises in power gen­er­a­tion and in­dus­trial out­put have not im­proved rev­enues much as these items are not sub­ject to state tax. Hence it re­grets that it is un­likely to hit the rev­enue pro­jec­tion of the 14th Fi­nance Com­mis­sion for 2019-20. Thanks to ma­jor cen­tral trans­fers, it has a rev­enue sur­plus, but this has fallen from a peak of 6.3% of GDP to 3.5% in 2017-18. Cap­i­tal spend­ing has stag­nated for seven years at around 6% of state GDP. Bot­tom line: Cham­ling’s claim of hav­ing huge sur­pluses avail­able for re-dis­tri­bu­tion as UBI sim­ply proves that elec­tion fever pro­duces much delir­ium. Some coun­tries with huge oil and gas rev­enues have set up sov­er­eign wealth funds to mop up to­day’s sur­pluses, and in­vest these wisely so that fu­ture gen­er­a­tions can ben­e­fit when the oil runs out. The state of Alaska in the USA has been giv­ing an an­nual div­i­dend to long-term res­i­dents from its oil rev­enues, rang­ing from a low of $331 to a high of $2,072 in 2015. These sums are tri­fle com­pared with the US poverty line of $14,000. It is, at best, ba­sic pocket money, not a ba­sic in­come.

The plain fact is that not even oil-rich states have the fis­cal head­room for a UBI. Mod­est cash sup­ple­ments are fea­si­ble, es­pe­cially if lim­ited to the needy. That is a more re­al­is­tic aim, in Sikkim or any­where else. Till fis­cal ca­pac­ity rises, UBI will be one more elec­tion jumla.

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