Why Universal Basic Income is Fraught With Serious Problems -Prabhat Patnaik
Income support should not lead to the State washing its hands of the poor after handing them a certain sum of money whose real value too would dwindle over time.
With Congress president Rahul Gandhi’s announcement recently at Raipur that his party had taken a “historic decision” to introduce an income guarantee scheme for the poor, and with the general anticipation that the Narendra Modi government’s last budget will also announce an income support scheme in some form, at least for “farmers”, the idea of a “universal basic income” for the Indian population is once more in the air. This idea was mooted two years ago in the Government of India’s Economic Survey, though it was meant only for discussion and represented the views not of the government itself but rather of the chief economic advisor of that time who, in turn was giving expression to an old World Bank prescription.
We must start with a distinction. Though the term “universal basic income” is bandied about, the proposals made on the question usually refer to what should more aptly be called a “targeted income top-up scheme”, i.e, a scheme where certain segments of the population are given a certain amount of extra income support, on top of what they are already presumed to be earning, in order purportedly to bring them up to a certain minimum level of income. This was true of the Economic Survey discussion. And even Rahul Gandhi’s phraseology, namely “income guarantee”, suggests that he, too, has in mind a targeted income top-up scheme rather than one that actually ensures a basic income for all.
While even this may at first sight appear a welcome move, it is fraught with serious problems. The first question to ask is whether this scheme would be in addition to the subsidies and the welfare schemes already in existence, or whether it would replace such existing welfare expenditures.
Again, most suggestions in this regard visualise a replacement, implicitly if not explicitly, of existing schemes, in which case what appears at first sight as income guarantee would cease to be so in reality. Not only would an income support calculated on the basis of existing prices and price subsidies be obviously inadequate when such subsidies are withdrawn, but even if the calculations do incorporate the effect of the withdrawal of such price-subsidies, they would still be inadequate in the absence of guaranteed delivery of goods and services.
The amount of income support, for instance, may be calculated on the assumption that the public distribution system (PDS) would be withdrawn, and that everybody would have to pay the open market price for foodgrains; but income support calculated even on this assumption would still not be enough if foodgrains are not actually delivered to the people. The PDS, in other words, does not just provide subsidised foodgrains to some; it also ensures that foodgrains are actually delivered to many. The withdrawal of PDS would leave people without assured food delivery, and cash income support would not per se bring them adequate foodgrains.
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