UBI in Sikkim: Chamling’s Chimera
Universal Basic Income awaits fiscal capacity
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.