Universal Basic Income for Sikkim - Assessing the Feasibility for India
iasparliament
January 11, 2019
Why in news?
Sikkim is set to become the first state in India to roll out Universal Basic Income (UBI).
It is essential, in this context, to assess the suitability of UBI idea for the whole of the country.
How does UBI work?
UBI has been hailed as a means of fostering social justice and equal opportunity.
It is also seen as a way of restoring individual choice and freedom and reigning in the influence of the state.
Basic Income - UBI is an idea that requires that every person should have a right to a basic income to cover the needs, just by virtue of being citizens.
A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work.
The five broad features of such schemes are:
payments at periodic regular intervals (not one-off grants)
payments in cash (not food vouchers or service coupons)
payments to individuals
universality
unconditionality
Subsumption - UBI would require subsumption of other subsidies and allowances in order to free up resources.
Subsuming other schemes is an essential prerequisite, given the sheer number of schemes and programmes run by governments in India.
The Budget for FY18 showed there were about 950 central sector and centrally sponsored sub-schemes in the country.
These, in fact, accounted for about 5% of GDP by Budget allocation, and top 11 schemes accounted for about 50%.
The food subsidy or Public Distribution System (PDS) is the largest programme, followed by the urea subsidy and the MGNREGS.
If the states are included, the number of schemes would be even larger.
What is the rationale?
India has brought down poverty from about 70% of the population at the time of independence to about 22% in 2011-12 (Tendulkar Committee estimates).
But the effectiveness of the targeted schemes run by central and state governments has always been in question.
Data manipulation and leakages characterise the system.
Hence they suffer errors both of exclusion (the deserving being left out) and inclusion (the undeserving benefiting).
Targeting is seen as being both inefficient and inequitable, and a licence for corruption, leading to an entire industry of middlemen.
In this backdrop, UBI envisages an uncompromised social safety net that seeks to assure a dignified life for everyone.
The beneficiaries would be better placed to take economic decisions in their own interest than an all-knowing state.
It also provides a safety net in a market economy where job losses, health shocks or death of breadwinners can push back families to below subsistence levels.
The UBI concept is also expected to secure a place in a global economy affected by uncertainties due to globalisation, technological change, and automation.
What are the global precedents?
Finland recently concluded a two-year experiment on basic income's effects on unemployed citizens.
Earlier, the government of Ontario, Canada, had announced a plan to test a kind of unconditional income guarantee.
It enrolled participants in three areas of the province for a guaranteed income for up to 3 years.
Some cities in the Netherlands have launched municipal-level trials.
Barcelona in Spain has tested several potential changes to its anti-poverty programmes, including unconditional cash payments.
Besides, two US-based nonprofits have completed pilot studies and are preparing to launch privately-funded basic income experiments on a large scale.
The charity GiveDirectly is reportedly working on plans to initiate a 12-year randomised controlled trial (RCT) to test the effects of UBI in villages in rural Kenya.
What is the case with Sikkim?
Sikkim’s ruling party, the Sikkim Democratic Front (SDF), has decided to include UBI in its manifesto ahead of the Assembly elections.
It aims to implement the scheme by 2022, but has already started the process to introduce the unconditional direct cash transfers.
Relevance - In India, Sikkim would appear to be the ideal testing ground for UBI.
It is a surplus power generating state, which exports nearly 90% of the 2,200 MW that its hydel projects produce.
This ensures a steady revenue stream that other states typically lack.
It has a literacy rate of 98% and a BPL population way below the national average.
Sikkim has indicated that it will do away with most subsidies before launching its UBI scheme.
What are the concerns in India?
Regional differences - None of the countries where UBI has been tried have levels of income disparity that exist in India.
Sikkim’s fiscal and debt liabilities position is better than many other states.
So, while the idea might work in Sikkim, it might not in, say, Bihar.
Social security - The reason for maintaining conditional social assistance is to prioritize those at the bottom of the income distribution.
The universal basic income principle is contrary to this.
So dismantling certain centrally sponsored and central sector schemes and replacing them with cash transfer could be counterproductive.
This particularly refers to Mid-Day Meal, Pradhan Mantri Gram Sadak Yojana, National Health Mission, Pradhan Mantri Awas Yojana, Sarva Shiksha Abhiyan, MGNREGS, and PDS.
These schemes have special significance in terms of the rural population, the socially vulnerable including SC/STs, children and women.
The World Bank too had suggested reading the policy of basic income "through the lens of ‘progressive universalism’".
Resource - Even if two-thirds of India’s 30 crore-odd households were to be given Rs 1,000 monthly UBI, it would annually cost around Rs 2.4 lakh crore.
There could be savings through rationalisation of subsidies and scrapping of wasteful and ineffective welfare schemes.
However, these measures are challenging when it comes to implementation, especially in terms of price rationalisation.
What can be done?
It makes sense, to go in for a UBI in a calibrated manner.
It can start with monthly pensions for all households having senior citizens and pegging this at a minimum Rs 1,000.
The UBI net can be gradually widened by giving beneficiaries the choice of either availing it or continuing with their existing entitlements.
