India’s annual $300bn budget is always unveiled with great pomp and circumstance. The finance minister quotes Shakespeare. The president arrives to Parliament in a horse-drawn carriage.
So it’s not surprising when the country’s chief economic adviser unveiled a dramatic new proposal that would provide no-strings-attached cash stipend for millions of Indians. Then he posed a philosophical question. What would Gandhi think?
No doubt India’s revered freedom fighter and champion of the poor might have some questions about the idea Arvind Subramanian put forth in India’s economic survey, released last Tuesday.
The proposal would provide an estimated $150 to $220 yearly income for the majority of Indian citizens, a cost that would be equivalent to an estimated 4 to 5pc of India’s gross domestic product — more than $2tr. The potential benefit, proponents say, is that the plan would bring a dramatic impact on reducing poverty.
A simple monthly payment would replace the dozens of government programmes for the poor — including rural jobs and public food distribution — that are rife with corrupt middlemen and waste. Although the plan would be ‘universal’ in theory, the wealthy and others who did not need the money would be excluded, Subramanian said.
Universal basic income has been mulled by economists since the days of Thomas Paine, but only in recent years has it been experimented in pilot programmes around the world — including one in the 1970s in the United States. Switzerland roundly defeated a plan to institute an unconditional cash payment equal to $2,500 to all its citizens a month last year. Finland recently launched a trial programme for about 2,000 of its unemployed residents this year. There were also two pilot programmes in the Indian state of Madhya Pradesh that showed favourable results.
But no other programme would even come close to the scale of India’s, a country with widespread poverty and more than 1.25bn people.
“It’s a radical new idea,” Subramanian said at a news conference last Tuesday. “It has a lot of challenges. So it’s an idea whose time is right for further deliberation and discussion and not necessarily immediate implementation.”
The proposal has serious detractors, who argue that it is too costly and discourages work. Among the prominent critics is Arvind Panagariya, the Columbia University economics professor who serves as vice chair of the country’s planning entity.
He recently told the Indian Express newspaper that — given the country’s current level of income and needs for health, education, infrastructure and defence — “we simply do not have the necessary fiscal resources” to give away income to millions of Indian citizens. He estimated the price tag at $229bn.
Subramanian said in an earlier speech at the ashram where Gandhi lived that the icon would likely have had several objections to the idea, including its cost, potential for misuse and the fact that it gives charity to able-bodied.
And yet: “It’s a new idea to eliminate poverty almost at the stroke of a pen,” Subramanian said.
Annie Gowen is The Post’s India bureau chief and has reported for the Post throughout South Asia and the Middle East.
— The Washington Post Service
Published in Dawn, Business & Finance weekly, February 6th, 2017