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 (Ramesh Pathania/Mint)
(Ramesh Pathania/Mint)

Opinion | Universal basic income scheme may not be right for India Story

UBI will be very difficult to repeal once introduced and so the government would do well to deliberate over the issue

Pending elections always seem to galvanise governments into announcing schemes and accelerating the pace of governance. With general elections due in April-May, the Bharatiya Janata Party-ruled government has been spurred into action, driven by recent losses in three stronghold states and a continuing economic crisis caused by deepening farm distress and rising unemployment. The announcement of a 10% quota for economically weaker sections in the general category and filing of sedition charges against protesting university students are being viewed as a government clutching at all available electoral straws.

In such a fervid political environment, another balloon has been floated. There have been accelerated discussions of the government launching a universal basic income (UBI) scheme to overcome hardships caused by economic stagnation. In particular, the Telangana state government’s experiment with a farmers’ cash support scheme, Rythu Bandhu scheme, and how it ensured electoral victory for Telangana Rashtra Samithi (TRS), is providing tailwind to the proposals. Opinion is divided whether the government should launch a UBI or only a farmer cash support scheme given the severity of farm distress and its likely impact on the final vote tally.

But, despite UBI’s professed role in tackling poverty and overcoming economic distress, there are multiple reasons why UBI may not be the right solution for India.

Let’s start with Rythu Bandhu scheme which promised cultivators 4,000 per acre per cultivation season. The Telangana government was able to launch the scheme in record time because of the hard work done by previous governments of undivided Andhra Pradesh in digitizing land records. This allowed the current TRS administration to identify beneficiaries without delay and launch the scheme just before elections. Launching a similar scheme in other parts of India—say Uttar Pradesh or Bihar, where land records are either non-existent or are in paper form and need to be re-certified—is bound to create more anguish than votes.

The Telangana scheme, as pointed out by various commentators, has multiple design flaws. For one, it focuses only on land-owning cultivators, many of whom are absentee landlords. In essence, they then are able to appropriate the 4,000-government support which should have been ideally available for the marginal farmer or the sharecropper who takes all the investment risks: buying inputs (such as seeds or fertilizers) and then being exposed to price volatility of the finished crop.

There are other moral and ethical issues that render UBI questionable.

One of the fundamental ideas behind UBI is that when everybody has a guaranteed income, market forces are allowed full play without being circumscribed by “market-distorting" social schemes. This is like a slippery slope and could lead to many unintended consequences. One immediate effect will be an emasculation of the social state, in whatever form it exists, and replacing it with private sector services. In all likelihood, private sector pricing of some essential sectors might verge on rent-seeking, leaving beneficiaries with little to spend on other services.

Take the example of higher education in India, especially the debate about public versus private institutions. As the state has retreated, private institutions have proliferated and costs have gone up without a corresponding improvement in education standards. Private education in India has largely become an exercise in land-grab and price-gouging under government patronage. The cost of education in many private institutions takes a life-time to repay without necessarily imparting the right skills. The best example is the large number of dubious private engineering colleges that have mushroomed (with the state’s active connivance), charging enormous fees but leaving many students worse off. There is no denying that there are many excellent private institutions in India; however, all the league tables and merit lists feature mostly public institutions at the top.

Many countries have tried UBI and have found that while it provides some cash to every poor citizen, it does not really tackle the economy’s structural problems that keep people poor or generate vast inequalities. A 2016 referendum for introducing UBI in Switzerland was comprehensively rejected, with only 23% of Swiss citizens voting in favour. The White House’s chief economist Jason Furman had also dismissed in 2016 the introduction of UBI on the grounds that it could worsen inequality.

The push for UBI is also coming from the technology sector which sees it as a solution to endemic unemployment that might be created in the wake of new and innovative technologies, like Artificial Intelligence or 3D printing. This is a rather reductionist view and disregards the fundamental right of people to work.

UBI, as an idea, found some traction in India when former chief economic adviser Arvind Subramanian dedicated a full chapter to it in the Economic Survey 2016-17. His advocacy came from a strange place: apart from equity (which is questionable) and dignity, Subramanian argued that UBI was a way to get around the leakage and coverage problems associated with current social sector schemes.

The current government would do well to deliberate and engage in multi-stakeholder discussions before taking the leap. The danger is once introduced, UBI will be very difficult to repeal.

Rajrishi Singhal is consulting editor of Mint. His Twitter handle is @rajrishisinghal

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