Universal Basic Income only sans present welfare schemes: Subramanian

25 February 2017

The Universal Basic Income (UBI) as proposed in the latest Economic Survey, cannot be an add-on benefits like the existing welfare schemes and can be only introduced when no other welfare programmes are in existence, the government's chief economic advisor Arvind Subramanian said today.

For UBI to be put in place, all other existing welfare projects have to be withdrawn as the cost of this programme will exceed the combined cost of all existing welfare programmes, he said.   

"The cost of this programme (UBI) is so huge that it cannot be an add-on to the existing programmes as the government cannot afford it and the government's finances will go bust," Subramanian said while addressing students of the Indian Institute of Management-Ahmedabad (IIM-A).   

"In India, UBI scheme is about upliftment of the poor... The government spends a lot of money in social welfare schemes, but they do not reach the targeted audience," he said.   

"Advantage of UBI is a very interesting way of overcoming the problem of governmental targeted spending," Subramanian, also an alumnus of IIM-A, said.   

But he said "it is very easy to introduce new programmes in the country, but it is very difficult to withdraw the existing ones".   

"Though this idea has been appreciated as a good one to alleviate poverty and provide basic level of income to people, it should be implemented in a way that is sustainable," the chief economic advisor suggested.   

He said while people make a hue and cry if something given to them is withdrawn, it is also true that the benefits of targeted programme also fail to reach all intended beneficiaries. 

He cited the example of MNREGA for leakage in welfare schemes where the targeted audience does not get desired benefits as the scheme is implemented through various agencies.   

He also countered the notion that giving money in hands (bank accounts) of the poor will mean that they are going to squander it. "If the money is given to women under UBI, there are less chances that it will be squandered," he said.   

On India's lack of competitiveness, especially in the manufacturing sector, he said it should be attributed to a combination of the choices India made after Independence.   

"Combination of choices we made during our initial year were not conducive for development of the manufacturing sector in India. We had stressed on the public sector, we had all these controls and all sets of industrial licence. Combined with the lack of infrastructure development, (it) stifled the manufacturing sector," he said.   

"Now, we are trying to undo what we had done for 30-40 years (after Independence), which is a huge historical challenge," he added.   

Ho also noted that while there is a convergence in economic growth of developing countries, which are growing rapidly, "surprisingly" in India, there is divergence as so-called backward states in the last 15-20 years continue to remain underdeveloped, rather showing that income disparity among states in India is increasing.

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