The ‘Universal Basic Income’ Proposal

Imagine a world in which everyone is unconditionally given a subsistence-level income by the state. This, combined with access to well-functioning public services would be, to quote Jean Dreze, “a fool-proof way of safeguarding the right to dignified living.” The chapter on “Universal Basic Income (UBI): A Conversation With and Within the Mahatma” in the Economic Survey 2016–17 (ES) begins with this. But unfortunately, given self-imposed “fiscal prudence,” the proposed UBI, which is neither “universal” nor “basic”, requires the dismantling of the most socially necessary welfare schemes, namely, the Public Distribution System (PDS), the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the Mid-day Meal Scheme. The envisioned UBI turns out to be no more than a small compensatory transfer (or income top-up) to a part of the population, and that too, one that will require the government to prune or do away with in-kind transfers of food, guaranteed minimum days of wage work, and other public social security measures.

The desire is to stick to budget neutrality even as its conception is the most illogical part of the UBI vision. In the face of the monstrous economic inequality that plagues the country, surely a proper UBI can be financed from income and wealth taxation of the very rich, as also, from indirect taxation of socially less desirable economic activities. Given that India has one of the lowest tax to gross domestic product ratios in the world, more so with respect to direct taxes (that include wealth and corporate taxes), it is inconceivable why the policymakers of this country cannot envisage a UBI that builds on higher tax revenue collections to expand the fiscal space.