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INDIA: Universal Basic Income Could Replace the System of Subsidies and Benefits at Hardly Any Cost.

In an interview on March 27th with journalist Govindraj Ethiraj from BOOM, Baijayant “Jay” Panda, a member of Indian Parliament representing the Biju Janata Dal Party, explains his view about the potential benefits of an Indian Universal Basic Income (UBI).

“The 7.1% growth rate India has today does not create the number of jobs it used to ten or twenty years ago,” Panda explains. The global phenomenon of technological development has made UBI a hot topic in economics around the world for the last two or three years.

At the same time, the subsidiary system in India is very inefficient. Based on a planning commission’s study 5 years ago, Panda estimates that out of every rupee spent by the government, only 27 paisa reach the citizen. “That means that 73 paisa goes away in salaries, overhead, and corruption, and leakage. We have only seen tremendous success in for example the use of Aadhaar (an identification system based on biometric and demographic data) and converting the subsidy on LPG cooking gas and instead of giving cylinders, you give cash directly to beneficiaries and get it on the market. You can see the same kind of turn around in kerosene subsidy and other subsidies.”

Panda continues: “The argument that has been put out by many economists around the world, many of Indian origin, is that suppose you came up with something like a thousand rupees per month per citizen, maybe universal, maybe targeted, then you bring them above the basic poverty line and beyond that you focus on all the other aspirational things citizens have, such as getting jobs and education.”

But should this income be universal or targeted to a specific group? There are pros and cons on both sides, Panda argues.


“Why would somebody like you or somebody like me need to have a thousand rupees of basic income given by the government? The argument in favour of a UBI is that we waste too many resources and too much effort trying to target. You have armies of lower level government officials going around in the districts counting who has a house, who has electricity, who has a fan, who has a scooter, trying to decide who deserves a subsidy and who does not. If you make it universal, you save enormous effort. There is also enormous leakage in the system. People like you and I will most likely not take the thousand rupees per month, but those who need it, will take it.”

Panda is open to the idea of targeting as well, though, and states that with technology, like the use of Aadhaar, it is perhaps possible to target much better today then it was ten years ago. “We don’t have to go universal at one go. We should keep on extending the use of technology to target the most leaky, the most corrupt subsidy.” The kerosene subsidy is a perfect candidate for such a pilot, according to Panda.

He compares the Indian situation with the US and Europe and explains why the situation in India is different. “If you look at the US or Europe, they have large social service expenditures, which are relatively efficient. In our case, we have a lot of low hanging fruit of inefficiency so that it is a win-win scenario. A UBI in India can be funded from the savings of the current systems. The fiscal deficit is not going to get worse. In the US and Europe, they have to take something away from the citizens. Here in India we are not taking anything away because whatever subsidies we have, it is mostly being leaked so it is not reaching the citizens anyway.”


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Photo: School children @ India by MrTopper007, CC BY-SA 2.0

Special thanks to Josh Martin and Dave Clegg for reviewing this article

About Hilde Latour

Hilde Latour has written 21 articles.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

One comment

  • Girdhari Sangar

    Mr Panda has taken a good initiative for UBI with DBT linked to J-A-M (Jandhan Account-Adhaar-Mobile App).First priority should be given to the lowest poorest 9 (Nine) Crore families. I give a margin of 33% error in including ineligible families i.e, 6 (Six) crore genuinely poor families may be covered under UBI . We can well imagine that just a monthly Direct Cash / Bank payment/transfer of Rs.1000/- p.m to a family will remove hunger, starvation and reduce poverty, hunger, starvation deaths of pregnant women at childbirth, of newborns, of infants , of children and senior citizens by more than 50-60%, due to the availability of cash with the families, to take care of food requirements and of course the need to access medical and healthcare, medicines and for hospital / doctor visit in sicknesses.
    let us first start UBI for these ( (Nine) cr poorest families to eliminate hunger, starvation and reduce poverty related deaths of these most vulnerable segments of society and improve the Image of the country in the World. An amount of Rs.72000 Cr is required from Aug 17 to March 2018, which is not a big amount for a country which made an allocation of 2,70,000 + Cr in the budgets of 2017-18 in the name of removal of poverty and upliftment of poor. Let us make a start from August 15.

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