By Ibu Sanjeeb Garg
Beating the Rhetoric
India has always firmly held its ground as a welfare state. A welfare state is one where the state undertakes measures to protect the health and well being of its citizens. Since independence the country has witnessed projects which have aimed to improve health, nutrition, education level among its citizens. Such projects have been a heavy mixture of direct intervention in the form of Direct Benefit Transfer, subsidies and others. A paradigm shift was witnessed when the government launched the National Rural Employment Guarantee Scheme, later called MNREGS. In this scheme people from the rural areas were offered hundred days of rural wage employment. While the jury is still not out on how MNREGS has changed the rural landscape, it cannot be denied that some areas have indeed prospered with the implementation of the MNREGS scheme.
It is in the backdrop of history that the question of Universal Basic Income (UBI) must be addressed. Universal Basic Income or UBI essentially means that each citizen would be given a certain amount of money in form of income on a yearly basis. Such ideas are being discussed because new disruptions in global economy like migration and automation threaten to take away traditional wage from a large number of citizens. The idea of UBI in India has caught the imagination of policy analysts and general observers alike since the announcement by the Chief Economic Advisor that there is a plan to devote a chapter on UBI in the forthcoming economic survey. While some commentators have opined that it would indeed be a welcome step, others have reasoned that the same would result in further fiscal burden on the already weakened Indian economy.
Yet the idea of UBI cannot merely be reduced to an argument of ‘for’ or ‘against’. The question of UBI invokes a fundamental question on what kind of welfare state India sees itself as and if at all UBI is implemented what can be the effective method of such an implementation. Before embarking on the question of UBI, one must analyse how much India spends as a percentage of its GDP on health and education of its citizens. According to the World Bank data in 2014, countries around the world spent on an average 5.99% of its GDP on health expenditure. For India, the same figure stood at 1.407. According to the same World Bank study, global average expenditure on education stood at 4.5% of GDP while during the same time for India it stood at 3.8% of GDP. It is thus clear that compared to the global averages, India spends lower on health and education. This does not signal a non commitment towards the same but rather the lopsided nature in how investments are made. A large part of expenditure made by the government is in the form of revenue expenditure in form of salaries, pensions, subsidies, while capital expenditure has often taken a backseat. Global evidence shows that investments in capital expenditure have produced far greater returns than revenue expenditure. Yet, despite low expenditure on both health and education, India has produced phenomenal results in improving both its health and education indicators. With almost 100% primary level enrolment in the offing, governments have now shifted their focus to the quality of the outcome as well, a fact demonstrated by the repeated stress on the yearly conducted Pratham ASER survey.
If UBI is launched in India, an important question to be addressed is how would it place itself. Will an UBI be launched in lieu of all subsidies or investments made by the government in form of programs or will it be an added component. The pitfalls of both approaches are quite evident. If UBI does subsume all other expenditure made by the government, then the basic infrastructure facilities especially hospital, schools and roads have to improve. As of today, India has one of the highest pockets spending on healthcare across the world. Government has to ensure access to education and health to all at nominal prices, if not subsidised. In this approach, before UBI itself, government would have to make massive investment in developing its infrastructure. On the other hand if UBI is launched merely as an appendage to the already existing schemes, then it would only become a major source of fiscal burden for the government. A middle path would be to remove all education and health subsidies and give the money directly to the people. With the recent spur in digitalisation and stress on banking, this could prove a viable tool. It would however carry its own complications in terms of which schemes should be subsumed and which should not.
The second issue would be the issue of targeting. Surely in a large country like India, not all citizens need or should be provided with a UBI. Then it would be important to decide what the baseline for such an UBI would be. Would it be Socio Economic status calculated on the basis of the last conducted Socio Economic census or poverty line calculated on the lines of Tendulkar Committee, for example. This again in itself brings the danger of targeted versus non targeted schemes. Social scientists have often opined that universal schemes in the true sense have often worked better compared to targeted schemes. A possible solution could be people voluntarily opting out on the lines of the LPG scheme. Such an effort would undoubtedly require the government to give a positive nudge to the citizens.
Global efforts towards UBI has shown interesting but divided results. In 2016, citizens of Switzerland voted comprehensively against the implementation of a UBI scheme. Yet Finland, another Scandinavian nation, launched a pilot UBI recently. The two-year pilot scheme will provide 2,000 unemployed Finnish citizens, aged between 25 and 58, with a monthly basic income of 560 euros ($581.48) that will replace their other social benefits. These citizens will continue to receive the basic income even if they find work. Scotland too, has announced intentions of putting up a pilot UBI in place. Despite these, no global evidence for or against is available as of today.
Proponents of the schemes within India have argued for the scheme on the basis of social experiments carried within a district or a town where the scheme has been successful. Yet they must realise that “one size fits all” policy have often failed in India because India is diverse. Small pilot success does not signal the readiness for an all India implementation. At the same time automation, less job growth and a burgeoning youth population are social realties as well. If the youth are not offered employment, the government has to ensure that they are taken care of, else it can become a social problem. Rising discontent and violent expressions are mere repercussions of a frustrated youth entity. It is in this respect that UBI must be understood and implementation, if any, must be embarked upon. UBI cannot be a remedy for everything but if implemented right, it may be able to provide certain answers to many problems.
(Views expressed by the author are personal)