India doesn't need Universal Basic Income but economic reforms

One of the more fundamental challenges while formulating an economic policy is (apart from what the actual policy should be) to time the policy right. In other words, it means that before the policy is proposed, the underlying situation of the economy is determined, its social and political effects calculated, its necessity and priority estimated.

The timing, therefore, is astonishingly critical and its effects are severely underestimated, which is why, the idea of introducing or even discussing Universal Basic Income (UBI) in India at this stage is extremely flawed and only caters to stimulate the intellectual fantasies of certain individuals in the government.

For the uninitiated, UBI primarily means that the government hands out a basic stipend to every citizen every month – enough money for people to live on.

What the government needs to do to achieve this is simply swap the existing safety net in lieu of this massive programme that will remove the major problem of targeting subsidies, then cut down on bureaucratic structures, and finally allow individuals to choose the way they want to use the cash deposited in their accounts and all will be well.

It sounds great in theory but it’s just the opposite in reality. As much as our politicians cry foul over inequality, they do not like the concept of equal distribution of benefits among voters. If everyone gets what others deserve, why would a voter vote for a specific politician? Not unless a skilful politician can carve a special scheme for his voters.

That’s when politicians start to lobby for special favors for certain groups and exemptions for the others. Why not more for senior citizens or the unemployed? What about children? How about those from backward classes or region? How can we forget farmers?

Then one has to also think about the reaction from different states. Whatwould their priorities be? What if some states want to continue distributing subsidies through the existing welfare system? Can the Union government force them to get into an arrangement? In framing a policy, rationale often takes a backseat to accommodate just enough stakeholders. And there are plenty of them.

Ultimately, the UBI scheme might look different from what it would set out to be – which is good in a way because that means that there will be some targeting involved. Which begs the question – if beneficiaries will be targeted, what is the need to call the scheme as “universal”? And if one does indeed go ahead with cash transfers to specific beneficiaries, we will be back to square one: differentiating and identifying those in need of assistance from those who are not.

On the other hand, if the government does manage to apply it universally, it poses another set of problems. First, it would mean that the cash given to each individual will be substantially less than he/she would have got under a targeted basic income scheme (because of the increase in the number of beneficiaries). Also, would that mean less cash in hand than the subsidy everyone received as in-kind benefits under the existing welfare system? That would be politically suicidal.

Second, if the government decides to shell out more money per each individual than what they got under the current safety net, it would be economically catastrophic.

Politically or economically, this is a minefield but even if it is somehow managed through sheer compromise and fortune, one needs to think about the broader cultural message this policy intends to send out: No matter what you do or where you are from – the government is there to pay bills for you. That too forever, because no government scheme ever has a plan of phasing out.

In any case, this should not be the government’s mandate. Instead, it should aim to create an ecosystem for people to excel and climb up the social ladder on their own terms. The government doesn’t have to hand hold “everyone” to generate goodwill among its share of voters. Economic redistribution is fine but one has to be mindful of its social follow-up effects on economic need in our society, especially on those who don’t deserve getting the monthly cheque.

One must therefore question the wisdom of those who brought the issue of UBI in spotlight and in focus: what was the real necessity to bring UBI up for proposal in India at this moment? It’s not a political battle that India was ready for. Then why raise a demand for discussion on it in the public? Couldn’t have that been done behind closed doors?

If the intellectuals in our government are honestly concerned about the common man, why not create as much noise about economic reforms as they do about UBI?

Our policymakers are always tempted to selectively pick those policies that may seem intellectually popular in the West yet disconnected from reality in the Indian circumstances. What is popular isn’t necessarily sensible. Its also true that many journalists (specially those from the international press) seem to be fascinated by the fact that such a suggestion was made in the Economic Survey, rather than seriously point out its flaws in the Indian context.

That’s another reason why that the proposal of UBI is so frustratingly ill-timed. One has to now spend considerable amount of energy to demolish the argument in its favour rather than use this precious space to make a convincing argument for the need to pursue economic reforms (tax structure overhaul, reforming civil services, decentralising functions to local/municipal governments and relaxing onerous labor/education laws).

These, along with other pro-employment policies, will do much more to generate employment and tackle poverty.

UBI can, therefore, distract us from real policy challenges, and its opportunity costs could be huge. India doesn’t need a debate on UBI right now but a sustained campaign to nudge Modi to pursue economic reforms.

Also read: Is India ready for a universal basic income scheme?

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