India is considering a radical idea for tackling poverty: rolling out a Universal Basic Income (UBI), according to a report by the country’s Ministry of Finance.
Released on Monday, the annual Economic Survey says that the scheme would nearly eradicate poverty — although it says there are “considerable implementation challenges” which have to be addressed first. The report calls for more pilot trials before India decides whether to roll out UBI nationally.
The idea behind universal basic income, which is attracting attention in countries including the USA and France, is simple: a regular state payment made to all citizens, regardless of working status.
The Economic Survey, written by the finance ministry’s chief economic adviser Arvind Subramanian, says that a UBI would promote social justice, and empower the country’s poor — as Business Insider first reported at the start of January.
Subramanian estimates that the scheme would reduce nationwide poverty to 0.5%, and cost between 4-5% of GDP.
While that might sound expensive, the survey notes that India’s current welfare schemes — which provide mostly middle-class Indians with subsidies for food, fuel, and fertiliser — cost around 5% of annual GDP.
He also argues it would be easier to implement than India’s current anti-poverty programmes, which are riddled with corruption.
In a country of over 1.2 billion people, the task of identifying who is and isn’t in need of financial assistance is a messy and wasteful one, something which a UBI could theoretically solve. He says that “by directly transferring money to bank accounts, and circumventing multiple layers of bureaucracy,” the scope for financial “leakage” is lower.
However, he also notes that India’s state has “low capacity, with high levels of corruption, clientelism, rules and red tape,” which could make implementing a far-reaching scheme like UBI difficult.
Subramanian concludes by calling for further trials of the scheme in a few districts after a number of successful pilots, but says the scheme is not ready to be rolled out yet.
Significant practical challenges facing the introduction of a UBI include the fact that nearly a third of Indians do not have a bank account.
“It’s an idea whose time is ripe for further deliberation and discussion, and not necessarily for immediate implementation,” Subramanian said.
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