Universal income better help than subsidies: Economic Survey

NEW DELHI: As widely expected, the Economic Survey 2016-17 has advocated universal basic income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.

Based on a survey on misallocation of resources for the six largest central-sector and centrally sponsored sub-schemes (except PDS and fertilizer subsidy) across districts, the Economic Survey points out that the districts where the needs are greatest are precisely the ones where State capacity is the weakest. This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI.

The survey points out that the two prerequisites for a successful UBI are functional JAM (Jan Dhan, Aadhar and Mobile) system as it ensures that the cash transfer goes directly into the account of a beneficiary; and centre-state negotiations on cost sharing for the programme.

The survey says that a UBI that reduces poverty to 0.5 per cent would cost between 4-5 percent of GDP, assuming that those in the top 25 per cent income bracket do not participate. On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 per cent of GDP.