Budget 2017: Will Arun Jaitley opt for Universal Basic Income?

The Jammu & Kashmir government has become the first to commit to a Universal Basic Income for all citizens living below the poverty line


A file photo of Union finance minister Arun Jaitley. Photo: Reuters
A file photo of Union finance minister Arun Jaitley. Photo: Reuters

New Delhi: Days before the Union budget which will be presented in the backdrop of disruptions caused by the demonetisation drive, the Jammu and Kashmir (J&K) government became the first to commit to a Universal Basic Income for all citizens living below the poverty line by providing direct benefit transfers, raising expectations that finance minister Arun Jaitley may follow suit.

In his third budget speech on Wednesday, J&K finance minister Haseeb Drabu said he would want to create a social security fund and provide a “Universal Basic Income” to all those living “below the poverty line” through a direct benefit transfer system. “Not only will it eliminate all the leakages, the cost of delivery will also be reduced dramatically,” he added.

However, what is more interesting is Drabu putting the onus on the Central government for initiating the process to implement UBI in the state.

“It is not possible for me to do it now and on my own; it will need not only concurrence but help from the Central government as well,” Drabu said in his budget speech.

Drabu refused to comment on whether he had prior information of a possible roll-out of the UBI throughout the country in Budget 2017 scheduled to be presented by finance minister Arun Jaitley on 1 February.

The finance ministry remains out of bounds for reporters during the budget-making exercise.

Chief economic adviser in the finance ministry Arvind Subramanian in September had said that the UBI is an “exciting idea”, promising to further elaborate his thoughts in the upcoming Economic Survey scheduled to be presented on 31 January.

While the reasons for providing UBI in Western countries, where the idea was originally developed, are stagnant wages and an effective demand collapse, in India, the issue at hand is providing financial security to the poor.

Switzerland recently rejected a proposal in a referendum to guarantee every adult citizen and long-term resident 2,500 Swiss francs (around Rs1.7 lakh) per month, while Finland is set to experiment with the idea on a pilot basis.

N.C. Saxena, former member of the Planning Commission, said he supported the idea behind UBI, but to target the right beneficiaries and find the fund for it is a difficult task. “Even if government guarantees Rs1,000 for people below poverty line, it will cost the exchequer Rs60,000 crore a year. The available data to select the beneficiaries is also not robust which could pose practical challenges,” Saxena said.

Saxena also said that the UBI should not replace all existing social sector schemes. “It can subsume the old-age pension scheme, but it cannot replace the rural job guarantee scheme. Also, if the government signals gradual withdrawal of social sector schemes while implementing the UBI, it will also defeat the purpose,” he added.

More From Livemint