Universal Basic Income a great idea, but needs to be tested

In this national election year, the concept of a universal basic income has become a political football. The opposition Congress Party is promising to implement a “nationwide minimum income for the poor” and Prime Minister Narendra Modis administration is proposing a “basic income for poor farmers.” What is not needed on this very serious and important topic is the scoring of political points. What is needed is a careful and considered non-partisan assessment by an independent commission to determine whether and how a universal basic income of some type could enhance the future of India and its people.

Factors that should be examined as part of that assessment include: the concept itself; the reasons for its increase in popularity; a review of where universal basic income has been implemented and the results achieved; the projected costs and benefits; and the feasibility of implementing such an approach here in India.

Fortunately, there are numerous sources that can be referred to in order to begin conducting such an assessment. They include: The research and writings of BIEN (Basic Income Earth Network), an international group comprised of knowledgeable individuals and organizations interested in basic income; the Indian Ministry of Finance’s 2016-2017 Economic Survey; and, India’s Universal Basic Income: Bedeviled by the Details, a publication of Carnegie India released in February 2018.

BIEN defines universal basic income (UBI) as “a periodic cash payment unconditionally delivered to all on an individual basis, without means test or work requirement”. An important point of emphasis in this definition is no “work requirement.”

The current interest in UBI in India was sparked by the 2016-2017 Economic Survey (Survey) which devoted a full chapter to the topic. The Survey concluded that India’s present approach to dealing with poverty was ineffective and its welfare schemes were poorly designed and targeted. It advocated replacing them with UBI which had three components: universality, unconditionality, and agency.

The Survey estimated that an annual transfer of Rs 7,620 to approximately 75 per cent of the Indian population would bring the poverty rate to less than 1 per cent. It projected that the cost, if all existing welfare and income support programmes were eliminated, would be 4.9 per cent of India’s annual GDP.

The Survey does not call for full universality. For political and fiscal reasons, it advises not making payments to the top 25 per cent of India’s income distribution.

UBI demonstration projects and cash transfer programmes in numerous low to medium income countries have shown promising results. In addition, developing countries such as Canada, the Netherlands, and Finland have experimented with UBI.

Finland conducted its experiment from January 2017 to December 2018 with approximately 2,000 unemployed citizens who received a regular monthly income that was not reduced if they secured employment. The initial findings of the study which were released in February of this year revealed that those in the test group were not more likely to get work than those in the control group but they “reported better well-being in every way.” Despite these outcomes, Finland is not moving forward at this point to a national roll-out of UBI.

India has had one small UBI experiment in Madhya Pradesh. The study funded by UNICEF with SEWA (Self-Employed Women’s Association) as the coordinator found that those who received cash payments preferred them to subsidies and produced a range of much more positive results than those in the comparison groups. By 2022, if the small state of Sikkim moves forward with its announced plans to provide a basic payment to all its citizens, India will have the largest full pilot of UBI in the world’s history.

There is much that is known about UBI; there is much more, however, that needs to be learned. Implementation of UBI on a large-scale basis is a theoretical construct and not an operational reality. Given this, it is premature to make massive changes that could produce unintended consequences or undesirable outcomes. The proper course, as recommended in the report from Carnegie India, is to “…run one or several large-scale experimental evaluations.” Carnegie goes on to note,”…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.”

As the saying goes, “Great ideas need landing gear as well as wings.” I believe UBI is a great idea. By taking it out of the political arena and letting a non-partisan commission take the time, do the study, and produce the recommendations that are required, India’s leaders can ensure that that its eventual UBI policy can take off, fly and land safely.

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