UBI And India’s China Lesson: Let Smaller And Prosperous States Go In First?

Advocated by Thomas Paine and Thomas Spence in the last decade of the 18th century, the conceptualisation of Universal Basic Income (UBI) is not new.

Paine first enunciated UBI in his works, Rights of Man (1791-92) and Agrarian Justice (1795), and this was further elaborated and contrasted by Spence in The Rights of Infants (1797).

According to Paine, the Earth in its natural uncultivated state belongs to the entire humanity. Thus, to him, “no one should be worse off than they would have been had they been born in natural state.”

Given how UBI rests on the fundamental that every individual gets basic income and therefore dignity, it is pertinent to analyse why UBI is needed today, most of all in developing countries like India, in order to bring in social cooperation and justice, a well-functioning financial system, to reduce poverty, to ensure more welfare gains for its citizens and also to lessen increasing income disparities.

Guy Standing, one of the first economists to advocate UBI in recent times, opines that UBI not only provides a sense of security to the poor but also offers them individual liberty.

Acknowledging that India has historically focused on “individuals who are poor by virtue of accident of their birth,” Indian chief economic advisor Arvind Subramanian said that UBI has some merit, for it makes the safety net provided by the Indian government wider.

Premised on the idea that a just society needs to guarantee each individual a minimum income, which she or he can count on. “Universal Basic Income,” according to the Economic Survey of India (2016-17), “is a radical and compelling paradigm shift in thinking about both social justice and productive economy, that provides the necessary material foundation for a life with access to basic goods and a life of dignity.”

Yet, India is still to design a well-functioning mechanism for UBI. Even when the idea of a UBI rests on a professed aim of “social justice, poverty reduction, agency, employment and finally, least administrative efficiency” while evoking principles such as universality, unconditionality and agency, several challenges remain unaddressed. These include — how to overcome the problem of universality, the need to contain fiscal costs, the difficulty of an exit from existing programmes and the realisation of state’s incapacity to implement UBI on such a gigantic scale, given its meagre resources.

Even when the idea of a UBI rests on a professed aim of “social justice, poverty reduction, agency, employment and finally, least administrative efficiency” while evoking principles such as universality, unconditionality and agency, several challenges remain unaddressed.

One way to formulate a UBI policy would be to understand how other countries have gone about implementing it. At a time when India needs to accelerate its development while battling challenges such as having a large proportion of its population under the poverty line, perhaps, it will do Indian policymakers well to take a look at what is being practiced in China in relation to universal basic income. Hong Kong and Macau particularly, even as subnational entities, are perfect examples of successfully implementing UBI.

Clearly, for the Indian Government, UBI is a serious policy instrument to address the challenge of poverty alleviation and decreasing income disparities.

China has been leading the way with its poverty reduction efforts. It has eradicated poverty in cities (by its definition, at least) and reduced the number of rural people below the official poverty line of ¥2,300 a year at 2010 prices from 775 million in 1980 to 43 million in 2016. Its aim now is to have no one under the line by 2020.

But China’s success story of exemplary poverty reduction is a blend of impressive economic growth and targeting individual poor through a “poverty household registry” of every person and household below the poverty line (The Economist, 29 April 2017). China has drawn up a personalised poverty alleviation plan for poor relief through “subsistence guarantee” or dibao — a minimum income guarantee that topped off incomes to a minimum level set by local governments.

Calling the programme dibao, meaning minimum livelihood guarantee, China later expanded the programme nationwide in 2007. But even dibao has its limitation of exclusion error and corruption in implementation. An example can be given of a Hunan province official who misappropriated ¥500,000 through 267 fictitious bank accounts opened in the names of extremely poor people.

According to the Goenchi Mati Movement of Goa, five countries namely Singapore, Mongolia, Iran, Alaska, Hong Kong and Macau are already giving UBI to their citizens.

The last three countries mentioned here are sub-national entities that are a part of the nation states of the US and China respectively. Macau has demonstrated that citizens should get a direct and equal share of the country’s wealth. In an announcement by the government of Macau, it was stated that, “In 2017, the government will once again offer the ‘wealth partaking scheme’ (WPS) to permanent residents at PTE 8000 and to non-permanent residents at PTE 5,400.”

The WPS is essentially a small basic income similar to the Alaska dividend. It is meant to ensure that all Macauese share the benefits of the economic growth of Macau. The growth of Macau (SAR) from a small economy to the world’s leading gambling hub and one of the most sought after tourist destinations of the world is awe-inspiring. Having employed a sophisticated model of paradiplomacy (the phenomenon where federal states conduct foreign policy with foreign countries at their local level), Macau today stands among the wealthiest regions of the world.

India’s current thrust on subnational diplomacy can very well be extended to the field of UBI for the purpose of poverty alleviation. China has employed a three-pronged strategy to eradicate poverty. Robust economic growth, coupled with a dibao-like subsistence guarantee to target poor through poverty household registry, and UBI in Macau and Hong Kong can be effectively emulated by India.

For India, a centre-state negotiation model, like the Good and Services Tax (GST) may be better suited.

By encouraging revenue surplus states like Goa, Chattisgarh, Gujarat and Andhra Pradesh to name a few, UBI can be implemented by the wealthy states first and later by the rest, rather than having all states implement the change at once.

Most would agree that UBI is definitely a laudable concept. Perhaps, India is not yet ready to implement it universally and unconditionally, but certainly smaller states like Goa could be chosen for pilot projects. The success story of Alaska and the recent resolution of Prince Edward Island (Canada) to vote in favour of trialing a ‘universal basic income’ could encourage Indian policymakers to go for the UBI albeit gradually.

Given how UBI’s economic viability finds growing appeal among experts and economists, the need of the hour is to learn from countries like China that have not only implemented this well but have also faced a challenge similar to India’s at some point over the years past.

Cruising ahead battling factors like budgetary constraints, bureaucratic red tapism and inefficiency, and state incapacity in implementing a mechanism of such scale, India needs to go ahead and make UBI a reality rather than limiting its action to initiating discussion and debate over the same.

This piece was first published on Observer Research Foundation’s (ORF) website and has been republished here with permission.