Universal Basic Income is a radical idea, but has to be implemented gradually: CEA

Terming the proposal for a Universal Basic Income (UBI) as a “radical idea”, Chief Economic Advisor to the Finance Ministry Arvind Subramanian said the Survey is not advocating its immediate implementation. However, he was not averse to a pilot study being conducted.

“The Survey is saying that UBI is a very new compelling idea. It has a lot of challenges. But, it is an idea whose time is ripe for further deliberation and discussion and not necessary for immediate implementation,” he said.

The survey dedicated a full chapter to UBI, noting that it can reduce poverty to 0.5 per cent at a cost of about 4 per cent to 5 per cent of the GDP, if those in the top 25 per cent income bracket are not included. Subramanian said a pilot study by the Self Employed Women’s Association (SEWA) of UBI in Madhya Pradesh showed “fairly positive evidence”.

“It was a small experiment. It should be extended,” he said, while pointing out that such studies are often very limited. Subramanian said the UBI has the big potential to improve upon the weak targeting of current subsidies.

“We think it should be done in a gradual manner, respect choice and lead to the replacement of existing programmes. The pre-requisites are to have a functioning Jan Dhan system, with the cooperation of the Centre and States,” he said.

Responding to a query on the wide range in the growth estimate for 2017-18, he said it reflects the high uncertainty in global and domestic economy. “We should be humble about how much we know and how much we don’t,” he said. The Survey has projected GDP growth between 6.75 and 7.5 per cent in the next fiscal while in the current fiscal, the economy will grow by 6.5 per cent due to the impact of demonetisation.

While highlighting the high points of the economy in the past one year, the Chief Economic Advisor, however, said that there are some concerns. “A sense of anxiety stems from the impact of demonetisation and from the sense that credit growth and job creation are not as well as expected,” he said.

He said that market interest rates are trending downwards, which could signal a cut in the policy rates. The Reserve Bank of India’s next policy review is on February 7.

Subramanian said a second volume of the Economic Survey, which would include a review of the economy, would be brought out later in summer.