India Floats Universal Basic Income to Eradicate Poverty

In India, the government has unveiled a radical proposal to eliminate poverty – providing a universal basic income for all its citizens, while stressing that this is only a concept.

The idea was floated in the country’s just-released annual economic survey that said guaranteeing a stipend to cover every individual’s basic needs would promote social justice.

Chief economic adviser Arvind Subramanian, the lead author of the survey, told reporters that the proposal has many challenges. “So it’s an idea whose time is right for further deliberation and discussion and not necessarily immediate implementation,” he said.

The survey suggests that a basic monthly income could replace a string of welfare subsidies for the poor that India currently has in place.

India spends billions of dollars on a rural work program that aims to ensure minimum employment for the poor and on subsidies such as food and fuel. The programs, however, have often been criticized for poor implementation, corruption, waste and very often failing to reach the intended beneficiaries.  

To eliminate intermediaries and officials who critics say often siphon off some of the benefits, both the federal and central governments have made efforts to replace the subsidies with direct cash transfers in recent years.

A universal basic income, however, would be much more ambitious and expensive than the current poverty welfare programs and many economists say India simply does not have the resources for such an initiative. Even if the middle class and rich are excluded, it would have to cover more than a billion people. India has a population of 1.3 billion. 

They say calculations in the survey show that ending the major subsidies for the poor would save 2.07 percent of GDP, but a universal basic income would need an outlay that would be more than double, amounting to 4.9 percent of GDP.

The survey considers various options such as covering only women at the start. “Women face worse prospects in almost every aspect of their daily lives – employment opportunities, education, health or financial inclusion,” the survey says.

Some other countries are experimenting with the idea of a universal basic income – Finland has launched a trial program for unemployed residents. In Switzerland, voters rejected such a proposal last year. 

The proponents of a basic income say every citizen has the right to a minimum income that ensures his or her basic needs; critics say it takes away the incentive to work.

The annual economic survey also suggested that the controversial currency ban implemented by the government last year has taken a toll on the economy. It estimated that growth would be one-quarter to one-half percentage points lower than the earlier forecast of 7 percent, but added that the adverse impact on gross domestic product “will be transitional.”

The government scrapped high value notes making up 86 percent of the country’s currency last November in a bid to crack down on illegal money. The biggest impact of the cash squeeze was on the country’s informal sector, which makes up more than two-thirds of the economy, employs millions and relies heavily on cash transactions.