Universal Basic Income can’t end Indian poverty
The politics of redistribution has brought various versions of a UBI into focus. While people in deprivation clearly need relief, a UBI alone can’t be relied upon to make poverty history
Election campaigns can generate more heat than light, and now that a war of words has broken out over redistribution between India’s ruling party and its chief opponent, we could do with more of the latter. To redistribute earnings from the rich to the poor literally, the idea of a Universal Basic Income (UBI) has been kicking around in policy debates across the world since it was first proposed by Thomas Paine, an American revolutionary, and refined by English writer Thomas Spence in 1797. The BJP government’s PM-Kisan scheme of cash transfers to farmers clearly draws inspiration from it. A poverty-focused version has found its way to the Congress manifesto for the ongoing Lok Sabha polls. If elected, the opposition party promises to give an unconditional income of ₹1 lakh a year to every poor family. Such a proposal must be evaluated on two aspects: as a durable way to end acute poverty and as a short-term fix for farm-sector distress, stagnant rural wages (or worse), rising household indebtedness and weak demand for consumer goods among the non-well-off, all of which call for attention.
While over 810 million people are officially eligible for free food, those in deep deprivation are estimated at around 220 million. Since poor families tend to be a tad larger than rich ones, it is safe to assume that we have about 40 million very poor households. If an income transfer is confined to the worst off, the Congress plan would require an outlay of ₹4 trillion. At about 1.2% of GDP, that’s not beyond the realm of fiscal viability. Policy critics who decried the rural jobs guarantee of 2005 as an unaffordable waste have come to acknowledge its role in poverty relief. That five more years of postcovid food handouts are deemed necessary by the government stands in mute testimony to the need of direct support. However, a UBI for the poor is likely to fall short as a long-term solution to poverty, particularly if basics like reliable law-and-order, safe drinking water, quality healthcare and effective primary education are not readily available in rural areas. State funds must address these deficiencies. Mobility barriers need to ease too. A survey on education outcomes earlier this year reported that 40% of our 14-18-year-olds cannot divide a three-digit number by a single digit. This is for students who have been to school. It points to lacunae of governance and delivery beyond the usual culprit of resource constraints. So, a UBI cannot be the be-all and end-all of welfare, as some of its champions see it. Nor is development something to be doled out to passive recipients, in the manner of ladling out porridge into bowls of the hungry. What people need first and foremost is political agency, a basic sense of citizenship with attendant rights and its entitlement to dignity. This generates demand for good education, healthcare and skill acquisition, raising what people earn and helping them emerge from poverty. Land reforms undertaken decades ago in some parts of India are seen to have had such an effect. The key is to empower folks in the spirit of our freedom movement.
Over time, a UBI has been tried out in many parts of the world. Nowhere has it been an unqualified success. In India, regular cash disbursals could offer the poor instant relief, but emancipation from hold-backs need to go hand-in-hand with redemption from poverty, given the role of liberty in achieving better lives. All said, while a UBI may hold appeal as a policy, perhaps even across party lines, it’s not a magic formula to make poverty history.