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Modi likely to launch Universal Basic Income for poor ahead of general elections

Modi likely to launch Universal Basic Income for poor ahead of general elections
While it is still not clear who the actual beneficiaries will be and what the threshold levels will be, it is clear that the government is willing to tweak its fiscal math, optics in the run-up to the polls being paramount.

With Rahul Gandhi throwing down the gauntlet at the ruling BJP dispensation saying that he will usher in a minimum income guarantee scheme if he comes to power, Prime Minister Narendra Modi may be compelled to roll out a Universal Basic Income scheme for the poorest of the poor. With both sides of the bipolar divide getting sharpened, BJP may now have to launch a pilot project through the mechanism of the budget. While it is still not clear who the actual beneficiaries will be and what the threshold levels will be, it is clear that the government is willing to tweak its fiscal math, optics in the run-up to the polls being paramount.

The 2016-17 Economic Survey had clearly indicated proposed income support for the bottom 75 per cent. The question is how the government will balance its financial equilibrium given that food subsidy is close to Rs 1,70,000 crore while MNREGA is an additional Rs 55,000 crore. Fiscal deficit breach is unsustainable at this precise moment in our journey to achieve financial equilibrium.

Estimated support of Rs 6,540 crore-Rs 7,620 crores is on the anvil if the government goes ahead with UBI. The UPA had rolled out UBI as a pilot project across 8 villages in Madhya Pradesh as far back as 2011-12. The big question remains how many districts will form a part of this new pilot project once it is announced in the budget.

Equally, will it be for those people designated below the poverty line, will individuals or households be the targeted beneficiaries? And of course most importantly, one cannot have food subsidy and UBI running in parallel, it can only be one or the other. In India, a rapid expansion of direct cash transfers linked to the national biometric database and small basic income experiments has galvanized an extensive debate on a UBI.

Carnegie India reckons supporters' claim that no-strings-attached payments will be an effective antidote to India's underperforming anti-poverty programmes and leaky, distortionary subsidies. Critics worry that they will undermine an already-fragile social security architecture, cause workers to drop out of the labour force and encourage wasteful spending.

The pre-budget Economic Survey of 2016-17 provides the most exhaustive treatment thus far of implementing an Indian UBI. It finds that India's largest welfare schemes are poorly targeted; in comparison, it argues that a UBI distributed directly into bank accounts will limit pilferage, be easier to administer, and prove a more effective anti-poverty intervention.

The 2016-17 Economic Survey deserved praise for bringing substantial rigour to the debate, thrusting a UBI into the national spotlight and prudently concluding that the time has not yet come for implementation.

However, should future Indian policymakers wish to implement a UBI, the survey's central design features offer a weak foundation. If enacted upon without deeper analysis, debate, or sufficient evidence demonstrating improvement in development outcomes, the Economic Survey's blueprint for an Indian UBI will produce underwhelming results.

(With inputs from agencies.)

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