Universal basic income can’t come at the cost of existing welfare schemes: report


New Delhi: A universal basic income (UBI) for Indian citizens cannot come at the cost of withdrawing existing welfare schemes and an exclusive reliance on Aadhaar-linked welfare payments for cash transfers can prove to be short-sighted, says new research.

The central design features proposed in the Economic Survey 2016-17 offers a weak foundation and implementing such a UBI scheme without deeper analysis or large scale experimental evaluations can produce underwhelming results, said the report, titled “India’s Universal Basic Income: Bedeviled by the Details”, by Carnegie India.

Authored by research analyst Saksham Khosla, the report observed that the proposed transfer is more of an income supplement and “the (economic) survey’s calculations incorporate neither the loss of consumption from withdrawing major existing welfare programs to finance a UBI, nor the transaction and transition costs of moving to a welfare system dominated by cash transfers”.

“Taking these factors into account is likely to result in an upward revision of the transfer amount and associated fiscal burden,” the report said.

Critiquing the Economic Survey’s proposal to present India’s largest welfare schemes as candidates for replacement, the report said that “several such programs are intended to achieve long-term development goals and cannot be simply substituted by cash transfers”.

“India’s national food distribution and public works programs, which the survey singles out for their high levels of misallocation and leakage, have improved significantly over the past decade in terms of their coverage and targeting efficiency,” it added.

Instead of an exclusive reliance on the survey’s proposed methods for financing, targeting, and distributing a UBI, the report suggested to the government to run one or several large-scale experimental evaluations as done in countries like Canada and Finland.

“By determining the impact on both the government (state and fiscal capacity) and citizens (economic and social outcomes), such trials can generate new empirical evidence to inform the growing UBI debate and reveal the most effective role for unconditional transfers in India’s welfare architecture,” the report said.

The Economic Survey 2016-17 had estimated that an annual transfer of Rs7,620 per person per year to 75% of India’s population will push all but India’s absolute poorest above the 2011-12 Tendulkar poverty line. True universality will be costly—politically and fiscally—the survey had said, calculating the cost of a targeted UBI (to 75% of the population) at 4.9% of the GDP.

“I think the most important question is whether UBI will be additional to existing schemes or replace them,” said former rural development secretary N.C. Saxena. “If it is additional, we will need Rs80,000 crore. Where is this going to come from? If it is replacing schemes like food subsidies, the government will have to weigh the consequences because doing away with food subsidy is a big political decision,” he added.livemint