Why a Universal Basic Income may not be a great idea for India

A Universal Basic Income cannot be a magic bullet. Cash alone cannot wipe out the disparities in a complex, unequal society such as India, divided by caste, religion and gender differences

Today, under increasing threats of artificial intelligence and rising inequality, even if the State wants to save the masses, it has little option but to intervene in how the economy works. Possibly that is why the idea of a Universal Basic Income (UBI) grew popular among Western thinkers, from both the Left and the Right. Will the State’s role as a creative executive soon be gone? Will the development agenda of the State shrivel and our wallets thicken with cash instead?

Milton Friedman, the father of neo-liberal economics, who championed the idea of reducing the role of the State in interfering with markets, viewed UBI as a substitute for all other government-run social assistance and welfare programmes, including removal of a legislated minimum wage. In contrast, economists such as Hyman Minsky propagated direct job creation programmes, which not only provide workers dignity but are a step in achieving full employment.

In two pilot studies on UBI initiated in 2010 in rural Madhya Pradesh, villages that received a basic income experienced an increase in the number of adults engaged in economic activity, the female labour force participation rate, and the number of hours worked. But these successes have already been achieved in states where the MNREGS has been implemented effectively.

Many of the current welfare schemes are more than just transfers “in kind”. Mid-day meal schemes, for example, provide necessary nutrition required by a child, incentivise parents to send their children to school instead of putting them to work, create jobs for mid-day meal workers and an atmosphere of social equality among children. Similarly, the MNREGS has also created assets, employed and empowered women, and enhanced environmental protection. So, their long-term effects are both economic and social. Thus, subsidy schemes that are working well in a particular state should not be disturbed.

Many argue that “targeting” is costlier and prone to corruption, as politics revolves around group-specific appeasement. Universal transfers may reduce it, with better chances of less divisive politics.

What about a UBI for all citizens, and simultaneously encouraging the well-off to give it up? All people had a subsidy for LPG initially, and then some gave it up. On the contrary, in case of UBI, the number of registrations will start from the bottom. So, the number of people not opting for it would likely to be more.

Certainly, a very small amount would not live up to the essential idea of basic income. Keeping the poverty line in mind, even a UBI of Rs 1,000 a month for 75 per cent of the people would cost about six per cent of GDP. If the amount is Rs 500 for children under 14, the cost would fall to nearly five per cent of GDP. The burden would reduce considerably if some existing welfare schemes are simultaneously abolished.

However, Amartya Sen and Jean Drèze’s objection to UBI is that for India it is pre-mature, for it is more of a strategic decision than an ideological one. Also, many hesitate to recommend a populist scheme like UBI, as it would be almost impossible to reverse it. Can we then conduct a nationwide UBI for two to three years, by replacing selected welfare schemes? If money is given to females identifying them as family heads, there should be less chance of wastage; and it might provide enormous scope for women’s empowerment within households.

If a nationwide pilot UBI with a possibility of reversing it is politically unviable, the pilot can be undertaken in selected areas within each state instead. However, would people prefer UBI with a specified amount to specified existing welfare schemes? Would they, in general, feel it against their dignity to earn without doing work? In a survey by the Telengana government, 70 per cent of respondents, especially women, preferred the PDS over cash transfers. They feared their husbands would take away the money and squander it on liquor.
 

A nationwide survey maybe conducted to gauge people’s opinions, where samples should be stratified maintaining socio-economic, demographic, and geographical combinations across the country. Some part of the pilot should be sandwiched between two opinion surveys on the same individuals. This might serve a purpose similar to the Swiss referendum on UBI in June 2016, the first of its kind in the world. And the government will be able to feel the pulse of the people. Interestingly, 77 per cent of the Swiss voters opposed UBI, although the Indian situation might be different. However, wide variations in public opinions are quite likely. Consequently, people might as well be given the option to choose between specified existing welfare schemes and UBI.

A broader question is whether income should be treated as a “right”, like education. If so, the question of replacing current schemes should not arise, at least morally. However, we must keep in mind that a reasonable UBI, even if implemented, cannot be a magic bullet. Replacing current schemes with it would not work, as not every cost is due to non-availability of cash — lack of infrastructure, regional and social inequality add to social costs. Cash alone cannot wipe out the disparities in a caste-religion-gender-driven complex, unequal society such as India. 

Atanu Biswas is Professor of Statistics, and Abhinandan Sinha is a research student, at the Indian Statistical Institute, Kolkata