The report has proposed a transfer of Rs.2,600 (in 2011-12 prices) to every Indian’s account. The report says that even such a modest level of UBI will incur a fiscal cost of about 3% of GDP, but would outperform the public food distribution and fuel subsidies on three counts.
It believes that the concept, if implemented, will provide a better alternative to the existing inefficient and inequitable state subsidies by increasing the coverage of lower income groups by 20 per cent. However, eliminating energy tax subsidies will substantially increase the fuel taxes and retail fuel prices for petrol (67 per cent), diesel (69 per cent), kerosene (10 per cent), LPG (94 per cent), and coal (455 per cent).
The IMF has also cautioned against the prevailing weakness in Indian banks and highly leveraged corporate sector which makes the country vulnerable to a tightening in global financial conditions.
This is an old idea, going back at least to the 1960s, when, interestingly, it drew support both from right-wing libertarians like Milton Friedmanand centre-left Keynesians like John Kenneth Galbraith.
The 1960s brought about the war on poverty, waged through federally funded social service and healthcare programmes. Milton Friedman sought a negative income tax, eliminating the need for a minimum wage and potentially the “welfare trap”, while bureaucracy could be curtailed. Richard Nixon supported and yet failed to push through a “Family Assistance Plan” while George McGovern’s 1972 campaign sought a $1,000 “demogrant” for all citizens.
In 1974, the Canadian government conducted a randomised controlled trial in Winnipeg, Dauphin and rural Manitoba in which lower-income households were given income guarantee. This negative income tax experiment, termed “Mincome”, helped over a thousand families below the poverty line in Dauphin earn a liveable income. It offered financial predictability, food security, improved health-care outcomes, better education, and social stability. With the onset of 1970s stagflation, induced by the oil crisis, such schemes were abandoned. But briefly, there was a town with no poverty.
