India’s Chief Economic Advisor (CEA) Anantha Nageswaran’s assertion last a few days back as reported by newspapers, that the concept of Universal Basic Income (UBI) was not necessary for India and ‘it may create ground for “perverse incentives” and dissuade people from seeking income-generating opportunities’ is wrong and far from reality in many ways.
The platform from where this was said is of significance. He was speaking at an interaction organised by the Confederation of Indian Industry (CII), a body which seeks financial incentives from the government before every Union Budget. Calling it ‘non-merit subsidies’ CII prescribes the government to curtail non-priority expenditure by rationalizing subsidies such as fuel and fertilizers. To hear from the CEA that government is not ‘wasting taxpayers’ money’ to ensure income to the poor to meet the basic subsistence is certainly music to their ears. It keeps the workers parched and trapped in precarity, willing thereby to work for any pittance or under any disagreeable condition.
At a time when the CEA is arguing that ‘India has not reached the stage where it is a moral or economic necessity to have universal social security’ and ‘(India’s) natural economic growth should take care of many of the aspirations’ India’s indices on poverty, unemployment, wealth distribution, price rise and other economic indicators are alarming.
According to a World Bank report, the pandemic pushed 5.6 crore Indians into extreme poverty. During the pandemic, the number of Indian billionaires grew from 102 to 142, while 84% of households in the country suffered a decline in their income. The soaring price rise of food and other essential commodities has pushed people to the brink. The double whammy of demonetisation and GST has broken the back of the informal sector, which employs 90% of India’s workforce, and small traders, and have never recovered since. This is in addition to the unplanned and harsh lockdown.
India ranks 107th out of 121 countries on Global Hunger Index 2022, behind our other counterparts in South Asia, except Afghanistan. In the last quarter of FY23, the unemployment rate was at 6.8%. In 2019, when the leaked report on the periodic labour force survey of 2017-18 pitched the unemployment rate at 6.1%, it was said to be the highest in 45 years. Of the estimated urban workforce of about 150 million, only 73 million seem to have full-time jobs. Labour force participation rate had declined to 36.9% in 2018 and has only marginally improved to 41.3% in Dec2022, according to CEIC data. So it is rather grim to hear him insinuate the millions as lazy, who, given an UBI, won’t any more “make their own efforts”.
That, UBI will lead to ‘perverse incentives and dissuade people from seeking income-generating opportunities’ is in contradiction to the global experiences. Since the ‘70’s cash transfers of various forms have been experimented with in many developed and developing countries, including the US, Canada, Finland, Namibia and Kenya. Spread across many decades and continents, the results were varying. However, everywhere the quality of life increased and nowhere it dissuaded people from seeking jobs and a better future.
In India, cash transfer was experimented in Madhya Pradesh, under the Madhya Pradesh Unconditional Cash Transfers Project (MPUCT) by SEWA and UNICEF between 2012- 2014. It was an unconditional monthly cash transfer in bank accounts of more than 6000 beneficiaries for 12- 17 months. The results of this experiment showed that the cash transfer had led to improved nutrition, school attendance, assets and number of work hours. There was also no evidence of increased spending on alcohol or lesser participation in work.
This is not to argue a complete shift to UBI or some other form of cash transfer, while the state withdraws from its welfare measures. UBI cannot replace a welfare state. The state cannot transfer cash and expose its citizens to the whims and risks of the market. UBI/cash transfers are useful to push people out of extreme distress, rampant unemployment and poverty, and it needs to be in addition to the welfare schemes.
But CEA is not arguing against UBI from that perspective. He calls it a perverse incentive, what the Prime Minister referred to as ‘rewadi culture’ some months back. The corporate tax cuts offered don’t fall into this ‘perverse incentive’. According to a report by the Parliamentary Committee on Estimates, the government suffered a revenue loss of Rs 1.84 lakh crore in 2019-20 and 2020-21 due to a reduction in corporate tax rates effective from 2019-20. Adding to this the amounts doled out to the corporate sector by way of Production Linked Incentive scheme and Viability Gap Funding would probably suffice to take care of a targeted UBI, if not Rs.15 lakh in every account!
While countries in global south and even in advanced capitalist west have been either considering or have implemented various versions of taxing wealth to invest on public services, here we are being advised to do the reverse.
CEA’s assertion indicates the government’s misplaced priorities and how out of sync they are with the ground realities. He promotes the state of denial in which the government is, often camouflaged with PR blitzkrieg around events like G20, installation of Sengols or state visits.
This article was originally published in Counter Currents and can be read here.
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