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LATEST NEWS UPDATES | The Tale And Maths Of Universal Basic Income -Jean Dreze

The Tale And Maths Of Universal Basic Income -Jean Dreze

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published Published on Feb 2, 2017   modified Modified on Feb 2, 2017
-NDTV

The rock-star days are back for Chief Economic Advisor Arvind Subramanian, who had maintained a studied silence ever since India scored an economic self-goal over his head on 8 November 2016. His ambitious Economic Survey, released on Tuesday, includes a much-awaited presentation of the Finance Ministry's thinking on Universal Basic Income (UBI). Contrary to some media reports, the Survey does not advocate a specific plan for UBI in India. Rather, it explains the idea, explores various options, and concludes that UBI "if not ripe for implementation is ripe for serious discussion". But there is certainly a tone of enthusiasm in the chapter on UBI.

The chapter begins with an upbeat discussion of the idea of UBI, and then gets a little entangled in the fiscal maths. In their enthusiasm for UBI, the authors make somewhat simplistic arguments for it. For instance, it is asserted that UBI benefits the poorest by minimizing exclusion errors. However, universalization is bound to come at a cost - either lower per-capita benefits, or less spending on other schemes, or higher taxes. Depending on who bears that cost, the argument may or may not be correct. Similarly, UBI is presented as a way of rectifying the current imbalance of social spending across districts: the poorest districts' share of social spending is typically less than their share of poverty. Quite likely, however, UBI would fare worse than many existing schemes in that respect.

Coming to the options, what the Survey discusses is not really UBI, but what might be called quasi-universal income top-up (QUIT). Let me explain. It is an essential part of the principle of UBI that the transfers involved should cover the basic costs of subsistence - hence the term "basic income". If UBI provides less than that, it is often called "partial basic income". In this case, since the proposed transfers are tiny in per-capita terms (less than half of the Tendulkar poverty line), "income top-up" would be more accurate.

Quasi-universal (the term is used in the Survey itself) refers to the fact that while universality may be the ideal, in practice, the transfers will be less than universal. The Survey first suggests something like 75 per cent of the population, identified by including all those who do not meet simple exclusion criteria. Later, various ways of further reducing the costs are discussed, such as restricting the coverage - initially, at least - to women, to specific groups, or to urban areas. It is not difficult to see how further restrictions might reduce QUIT to a targeted income top-up.

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NDTV, 2 February, 2017, http://www.ndtv.com/opinion/the-tale-and-maths-of-universal-basic-income-1655225


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