India Floats Universal Basic Income to
Eradicate Poverty
In India, the government has
unveiled a radical proposal to eliminate poverty – providing a universal basic
income for all its citizens, while stressing that this is only a concept.
The idea was floated in the
country’s just-released annual economic survey that said guaranteeing a stipend
to cover every individual’s basic needs would promote social justice.
Chief economic adviser Arvind
Subramanian, the lead author of the survey, told reporters that the proposal
has many challenges. “So it’s an idea whose time is right for further
deliberation and discussion and not necessarily immediate implementation,” he
said.
The survey suggests that a basic
monthly income could replace a string of welfare subsidies for the poor that
India currently has in place.
India spends billions of dollars
on a rural work program that aims to ensure minimum employment for the poor and
on subsidies such as food and fuel. The programs, however, have often been
criticized for poor implementation, corruption, waste and very often failing to
reach the intended beneficiaries.
To eliminate intermediaries and
officials who critics say often siphon off some of the benefits, both the
federal and central governments have made efforts to replace the subsidies with
direct cash transfers in recent years.
A universal basic income, however,
would be much more ambitious and expensive than the current poverty welfare
programs and many economists say India simply does not have the resources for
such an initiative. Even if the middle class and rich are excluded, it would
have to cover more than a billion people. India has a population of 1.3
billion.
They say calculations in the survey show that
ending the major subsidies for the poor would save 2.07 percent of GDP, but a
universal basic income would need an outlay that would be more than double,
amounting to 4.9 percent of GDP.
The survey considers various
options such as covering only women at the start. “Women face worse prospects
in almost every aspect of their daily lives - employment opportunities,
education, health or financial inclusion,” the survey says.
Some other countries are experimenting
with the idea of a universal basic income – Finland has launched a trial
program for unemployed residents. In Switzerland, voters rejected such a
proposal last year.
The proponents of a basic income
say every citizen has the right to a minimum income that ensures his or her
basic needs; critics say it takes away the incentive to work.
The annual economic survey also
suggested that the controversial currency ban
implemented by the government
last year has taken a toll on the economy. It estimated that growth would be
one-quarter to one-half percentage points lower than the earlier forecast of 7
percent, but added that the adverse impact on gross domestic product “will be
transitional.”
The government scrapped high
value notes making up 86 percent of the country’s currency last November in a
bid to crack down on illegal money. The biggest impact of the cash squeeze was
on the country’s informal sector, which makes up more than two-thirds of the
economy, employs millions and relies heavily on cash transactions.