Providing basic services for all

Most countries which are experimenting with UBI have a long history of being welfare states

The idea of a universal basic income (UBI) has been proposed and debated for quite some time in different forms across the world, although it hasn’t yet been implemented. Recently, several economists have joined the bandwagon in proposing UBI for India. UBI involves giving some amount of cash to every citizen of the country. In its pure form, the two fundamental principles of UBI are universality and provision of a basic living income. This is different from various existing conditional/unconditional cash transfers, which usually target households/individuals who are unable to participate in the labour market for some reason — for example, social pensions for the elderly. UBI is not a substitute for but complementary to existing social security measures and provision of basic services by the government. 

The idea is certainly welcome, given increasing inequality across the world. While in developing countries, the push for UBI is a response to anxiety created by current trends of automation, which may increase unemployment, in developing countries it is a response to “inefficient” public spending on social sector schemes. 

Financing UBI in India

One reason why UBI remains a conceptual idea rather than a reality is the high cost of implementation. Estimates in India suggest that a minimum basic income equivalent to the poverty line would require Rs 24,200 billion per year — an amount higher than the total tax revenue of the government (Rs 23,400 billion in 2015-16). 

The fact that UBI in its true sense cannot be financed has been accepted by most proponents, and alternatives have been presented, ranging from reducing population coverage to less than universal to reducing the quantum of transfer. These violate the fundamental principles that make UBI appealing in the first place. 

Even with quasi-universal coverage and less-than-basic-income cash transfers, are there sufficient finances? Raising resources by reducing tax exemptions and evasion, or replacing all current subsidies with UBI, has been proposed. Mundle and Sikdar arrive at a net subsidy figure of 10 per cent (2011-12) by including all public expenditure on economic and social services, which distorts the basic understanding of subsidies and the role of the State in economic and human development. This implies that the government will give up its obligation of providing basic services to citizens on education, health, nutrition and infrastructure and transfer money equivalent to the poverty line. This is neither the intent of UBI nor consistent with current proposals in Europe.

Cash transfer by a different name

UBI proposals in India suggest replacing existing programmes of delivering public services to citizens by a direct cash transfer, arguing that the programmes suffer from leakages and corruption. However, most cash transfer programmes have similar, if not higher, corruption levels and suffer from the same problems as in-kind transfers. A large part of corruption is due to targeted delivery of services with significant exclusion and inclusion errors. These will remain with UBI for the targeted population.

The argument that cash will reduce inefficiencies also rests on the assumption that Aadhaar-based biometric authentication will allow technology to weed out ghost beneficiaries. However, neither is Aadhaar necessary for ghost-card elimination nor is biometric authentication foolproof. Besides, Aadhaar authentication cannot deal with wrong targeting. While technology may help in improving service delivery, that holds true for both cash and in-kind transfers. 

Such a move also means that citizens will be left at the mercy of the private sector to avail of basic services, which would lead to large-scale exclusion of the poor and vulnerable, affecting human development outcomes for current and subsequent generations. If there is an immediate learning for India from Canada and almost all European countries where UBI pilots are being discussed, it is the model of free public provisioning of basic services and not UBI, which is complementary to and not a substitute for public services. 

Is there an alternative?

Even if additional resources are mobilised, will it justify UBI? The answer is an emphatic no. Given the level of deprivation and lack of availability of basic services, what is required is an increase in provision of basic facilities. India is among the countries with the lowest levels of spending on health and education.

A better way to implement UBI would be to follow the principle of universality. One existing programme which seeks to deliver a basic income to citizens is the National Social Assistance Programme (NSAP). It provides a modest income transfer to those who have been excluded from the labour market, including widows, the elderly and the disabled — also classified as BPL households. Such programmes could be made universal, at least for these groups. It is also important to increase the quantum of transfers to at least half of the poverty line at Rs 1,000 per month. The total expenditure would be less than 0.5 per cent of GDP. 

Universal basic services

Most countries which are at the forefront of experimenting with UBI have a long history of being welfare states, based on the principle of free and universal access to basic services. Besides health and education, these include various forms of social protection such as unemployment allowance. The current debate in these countries is a natural extension of the welfare architecture that has worked with public expenditure over the years.

On the other hand, India is yet to acknowledge the importance of public provisioning of basic services, leave alone creating an infrastructure for it. While cash transfers and social support measures are important for those unable to access the labour market, what is also important is to increase spending on basic services.

An essential component of such an architecture is the basic principle of universal access for everybody at the same cost (in most cases, free). It has been shown in India that even the most corrupt programmes, such as the PDS, have seen massive improvement after they were universalised. What India needs at this moment is not a costly adventure like UBI at the cost of all other government expenditure, but a push towards universal access to basic government-provided services for all sections of the population. Such a proposal for universal basic services (UBS) should be a pre-condition before UBI can be considered. 

The writer is Assistant Professor of Economics at Jawaharlal Nehru University.

Published with permission from Ideas For India, an economics and policy portal. You can read the full version here