Thinking Together

THE UBI refers to a minimum level of money income that the State ensures for its citizens. Typically, the government transfers a stipulated amount of money to all its citizens to ensure that they have access to a minimum level of income. The quantity of such a money transfer is determined either by estimating the average shortfall of per capita income from a poverty line, or by estimating an amount required to live a life of basic dignity.

While the idea of a UBI might appear appealing, there are a number of problems in accepting it as a policy solution to the problem of poverty. To begin with, when we conceptualise the idea of development, it is important to remember that income is only a means and not an end. Whether higher incomes would lead to a better life will be determined by a number of other socio-economic and institutional factors. A government may provide cash to people instead of providing free public schooling or subsidised health care. The people are then supposed to purchase education and health care from the “market” for a “price”. But what if there is no school or hospital to purchase the service? What if there is a private school or hospital, but they refuse access to certain social groups? What is happening in reality, here, is that the public provision of social services is replaced by the private purchase of social services (where the government partially finances the purchase). This is indeed a dream project of neo-liberalism. The CPI(M) is opposed to the introduction of UBI from such a standpoint.

In India, the proponents of the UBI argue that most social sector schemes, such as the public distribution system (PDS), MGNREGS, Sarva Shiksha Abhiyan and the Mid Day Meal scheme, are ridden by corruption, due to which there are many “leakages”. The solution they offer is to close down all these schemes, monetise the in-kind benefits accruing from them, and transfer an equivalent amount of cash into the bank accounts of the beneficiaries. The sum-total of all such transfers would constitute the UBI.

There are many reasons why such a shift should be considered dangerous.

First, let us consider the example of the PDS. India’s PDS is a product of the national food policy that emerged in the 1960s, and tried to address the interests of consumers and producers. It was an integrated system of food procurement and distribution. Any dismantling of the PDS would also mean an end to food grain procurement, which forms an important pillar of support to India’s peasantry.

Secondly, cash transfers are highly prone to inflation-led devaluation. When cash transfers are made, the purchasing power of recipients will increase in the short-run, leading to a rise in the average market price of the social service. As market prices go up, the real value of the cash transfer will fall, which will disproportionately affect the poor than the rich. In other words, the outcome will be highly regressive.

Thirdly, money is fungible. For any household, a cash transfer under UBI would by no means ensure an equivalent quantity of purchase, as before, of the social service. Studies have shown that women, in particular, always prefer an in-kind transfer (like food from the PDS, or mid day meals for children at school) than a cash transfer.

Fourthly, if we look around the world, UBI-type policies have been more successful and practical in the developed economies than in the developing economies. In most developed economies, per capita incomes are higher, and social services like education and health care are already universally assured and provided by the government. In such contexts, provision of UBI is seen as a policy that takes care of people who continue to be excluded, for one reason or another, from the welfare net. It is not seen as a policy to achieve, in the first place, advances in education or health (as is being spoken about in India now), but to plug possibilities of exclusion.

Finally, as many experiences with government programmes in India have shown, there may be major delays in the transfer of the UBI into the bank accounts of people. Unpaid arrears accumulate over months or even years. Typically, faced with such delays, the beneficiaries are left with two options: forgo purchase, or borrow money informally. If the latter, the interest outgo would constitute an equivalent devaluation of the transfer.

The Economic Survey has introduced the UBI as an instrument to qualitatively restructure the social role of the government – from a “direct” provider to an “indirect” provider. Under its new role, the government will only partially finance the open market purchase of social services by the poor. This is not acceptable to the CPI(M). According to the CPI(M), UBI should not replace any existing in-kind or in-cash transfer from the government to the Indian people. It should strictly be seen as a supplementary transfer to the people without disturbing the existing social protection infrastructure.


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