The Economic Survey 2016-17, tabled in Parliament on the first day of the Budget Session, has recommended launching a Universal Basic Income scheme to guarantee a minimum wage to every citizen. The Survey has promoted the concept as “an alternative to the various social welfare schemes in an effort to reduce poverty”. “UBI is a powerful idea whose time, even if not ripe for implementation, is ripe for serious discussion,” the survey said.
Based on a study of misallocation of resources meant for a number of central schemes, the survey found that districts that need the most assistance have the weakest “state capacity”. “This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI.”
Although a “conceptually appealing idea”, the survey has acknowledged the challenges of implementing the scheme, including the risk of becoming “an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable”.
Therefore, to streamline the implementation of the scheme, the survey has recommended a functional Jan Dhan, Aadhaar and mobile payments system to “ensure that the cash transfer goes directly into the account of a beneficiary” and negotiations between the central and state governments on sharing the cost of the initiative.
To reduce poverty to 0.5%, UBI would cost between 4% and 5% of the GDP, “assuming that those in the top 25% of the income bracket do not participate”, the survey said. It pointed out that it cost 3% of the GDP to provide the subsidies currently offered to the middle class, including food, petroleum and fertiliser subsidies.