Universal Basic Income: The Indian Experiment 

India may well become the laboratory for economic experiments in bringing Universal Basic Income (UBI) or its variants to some or all of its citizens in the years to come. Universal Basic Income is a welfare measure where the state pays a subsidy to all citizens to afford them a minimum standard of living, first proposed by British thinker Sir Thomas Moore and later popularized by American revolutionary and thinker Thomas Paine.

In India, after the southern state of Telangana, last year announced the `Rythu Bandhu’ (Farmer’s Friend), a scheme which promised a fixed income to all farmers depending on the acres of land they owned; the Himalayan state of Sikkim has now promised a Universal Basic income to all its 600,000 citizens as a measure to assure a minimum income to all families and to keep its people from migrating to large cities in other states. The coastal state of Odisha has also promised poor farmers a similar basic income formula. Thereby, it could become the third state to embrace the welfare measure as an instrument of state policy.

Doing the same for all of India’s 1.3 billion people would obviously take a huge amount of money that India’s $ 2.7 trillion economy may not be able to afford at the current juncture.  Plans to roll out variants of the Universal Basic Income scheme are being touted by both the Government and by opposition parties in the run up to General elections in April-May this year.

The idea of a Universal Basic Income was first mooted seriously in India by economist Arvind Subramanian in the Economic Survey 2016-17, a document the Indian Government publishes every year ahead of its budget outlining economic challenges and achievements and ideas for the future. In that Survey, one of the suggestions was for a Universal Basic Income or a uniform stipend paid to every adult and child, poor or rich.

“From Sikkim, Telangana, Odisha, our new rural income proposal … India is a crucible of exciting experimentation on Universal Basic Income (UBI). Ideas matter,” the former Chief Economic Advisor Subramanian tweeted recently.

Subramanian has since his Economic Survey, co-authored a paper titled `Quasi-Universal Basic Rural Income: The Way Forward’ where he and other economists had calculated that to give a basic income of Rs 1500 a month to each poor household in the country would cost about 1.3 % of India’s GDP.

India is not the first country to think of such a move. Others have experimented with the idea in recent times too. An Italian movement that was led by comedian Beppe Grillo, had come up with the idea of a “citizens’ income,” a less radical version of the “universal basic income,” promising a support income for Italian households earning less than 9,360 euros a year.

Finland which experimented with a similar scheme three years back however, gave it up last year, terming it as a failure. The reason for Finland’s income support scheme failing, was that the state already had high quality free education, healthcare, housing support, and unemployment allowances. This was seen as an unnecessary frill.

In the 1960s, United States and Canada saw agitated debates over welfare measures where among other things, a Basic Income was debated and became quite popular. The then US President Richard Nixon in 1969,  even proposed a negative income tax in a bill to the US Congress which could give poor citizens a monthly subsidy. The bill sought to guarantee a family of four, $1,600 a year.

Researchers have found the basic income guarantee did not impact a person’s willingness to work, nor was it too expensive for the then US Government to pay for.

Though UBI has many advantages, there are many practical challenges too. A transparent and safe financial architecture that is accessible to all is important for the success of the UBI. In other words, the success of UBI depends on the success of efficient mode of delivery systems.


Script:  Jayanta Roy Chowdhury, Business Editor, The Telegraph