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Before Universal Basic Income, We Must First Get Social Spending Basics Right -Anjana Thampi and Ishan Anand
-TheWire.in

The Economic Survey 2016-17 devotes a chapter to the provision of a Universal Basic Income (UBI), describing it as a “raging new idea,” a “radical new vision” and “the shortest path to eliminating poverty”. While warning that the UBI “should not become the Trojan horse that usurps the fiscal space for a well-functioning state,” the survey says a de facto UBI can be instituted in the existing “fiscal space”. It argues that winding up existing subsidies and welfare schemes could generate enough resources to institute UBI. To make this argument, the survey includes a table which lists the subsidies and costs of the existing social sector programmes and their expenditures. While the survey uses the table to calculate the amount of UBI that can be provided by scrapping the subsidies, the list includes something else of interest – the low expenditure on food, health, education, pensions et cetera. India’s ridiculously low social expenditure is the real problem that needs to be discussed urgently. While it is a well-known point, it is getting lost in all the hype and excitement around the UBI and needs to be reasserted.

The UBI is just a mode of transferring money from the government to its citizens. Various modes of transfer already exist; some of them are in-kind transfers (PDS, mid-day meals), some are subsidies and others are in the form of cash transfers (pensions, LPG). The Survey makes a case for UBI by citing the misallocations and leakages in the existing schemes. We believe that the question of poverty and deprivation cannot be addressed on the hope that a new mode of transfer will fill up the leakages in the existing schemes. For that, along with ensuring that the expenditure reaches the intended beneficiaries, we need to increase our public expenditure levels. The Budget, presented the day after the survey was released, makes it clear that the government has no intention of changing the trajectory of social sector expenditures. While the budgetary provisions (as a percentage of GDP) for health increased only marginally from 0.25% (2015-16 Revised Expenditure) to 0.28%, the allocation for education came down from 0.49% of the GDP to 0.47%. Development expenditure, rural expenditure and the total expenditure as a proportion of GDP are all projected to fall in 2017-18 and the government is adhering to a stringent fiscal deficit target of 3.2% of the GDP. To put things in perspective, we compare India’s expenditure levels to those of some selected countries.

India’s expenditure on health and education is much lower than some relatively poorer regions of the world. For instance, Sub-Saharan Africa, Nepal and Bhutan are ahead in terms of health and educational allocations. Large countries like Brazil and China fare much better than India. The countries that India is supposed to be emulating by moving towards UBI spend many times more on these basic public provisions. These figures provide good insight into why India stacks up poorly in comparison to most of these countries when we look at indicators like infant mortality rate or life expectancy at birth. The expenditure levels are so low that a mere change in the mode of transfer from in-kind to cash will not make much of a difference.

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