UBI alternative to State subsidies for poverty alleviation: Economic Survey

  • UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion, says the Economic Survey.

Recommendations of Economic Survey 2016-17 on UBI:

  • The Economic Survey 2016-17 has recommended Universal Basic Income (UBI) as an alternative to the various subsidy focused social welfare schemes that aim to reduce poverty.

  • However, the Survey also pointed out that there are a “number of implementation challenges” due to which there is a risk that UBI would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable.

  • The Survey, which was tabled in Parliament on Tuesday, pointed out that “UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion.”

  • Based on a survey on misallocation of resources for the six largest Central Sector and Centrally Sponsored Sub-Schemes (except PDS and fertilizer subsidy) across districts, the Economic Survey pointed out that the districts where the needs are greatest are precisely the ones where State capacity is the weakest. “This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI,” it said.

  • It further stated that functional JAM (Jan Dhan, Aadhar and Mobile) system to ensure that the cash transfer goes directly into the account of a beneficiary and Centre-State negotiations on cost sharing for the programme, are prerequisites for a successful UBI.

  • As per the Survey, UBI that reduces poverty to 0.5 per cent would cost between 4-5 percent of GDP, assuming that those in the top 25 percent income bracket do not participate. On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP.

  • “The survey juxtaposes the benefits and costs of the UBI scheme in the context of the philosophy of the Father of the Nation, Mahatma Gandhi.

  • The Survey states that the Mahatma as astute political observer, would have anxieties about UBI as being just another add-on Government programme, but on balance, he may have given the go-ahead to the UBI.

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