Table of Contents

Seventy years ago, then prime minister Jawaharlal Nehru declared that newly independent India would endeavor to “fight and end poverty and ignorance and disease.”1 India has made giant strides since. Nearly one in two Indians were poor in 1951 compared to one in five Indians today,2 and New Delhi lifted more than 130 million citizens out of poverty between 1994 and 2012 alone.3 But the scale of India’s poverty challenge and its burgeoning population dwarf this tremendous headway. India is still home to more of the world’s poor than any other country, and economic disparities in the country are growing across states, across social groups, and in both urban and rural areas.4

To address poverty, India has traditionally relied on a combination of fostering economic growth; providing basic public services like healthcare and education; and distributing a variety of subsidies, pensions, and cash transfers. Aware that the benefits of growth have been eluding India’s neediest citizens and that service delivery has been erratic, the state has invested heavily in targeted welfare programs in the last few decades. While the scale of these programs is staggering—India runs the world’s largest school nutrition and public works programs—their performance has been subpar, plagued by pilferage, capricious targeting, and poor implementation.5 While these schemes seem to have improved significantly in recent years, the Indian government has implemented ambitious reforms to shift from in-kind benefits to direct cash transfers into citizens’ bank accounts via Aadhaar, the nation’s vast biometric identification system.

As India’s interest in using cash to alleviate poverty has grown, the concept of a universal basic income (UBI) has garnered renewed attention in advanced economies elsewhere in the world. This radical welfare reform proposal boasts a five-hundred-year intellectual history and recommends that states give every citizen regular, no-strings-attached cash payments. The idea was initially championed by Silicon Valley stalwarts and Scandinavian social democrats. But several economists have noted its potential to alleviate poverty in low-income countries by slicing through bureaucratic red tape, reducing corruption, and ensuring that entitlements reach intended beneficiaries.

As India’s interest in using cash to alleviate poverty has grown, the concept of a universal basic income (UBI) has garnered renewed attention in advanced economies elsewhere in the world.

The Indian government’s annual Economic Survey in 2016–17 devoted a detailed chapter to the merits of a UBI. The Economic Survey estimated that providing a modest basic income to all but the richest quartile of Indians could shrink national poverty from 22 percent to 0.5 percent, while promoting social justice and empowering the poor. But the survey discouraged immediate implementation, citing the tricky logistics of delivering direct payments over the last mile and the thorny politics of financing such a scheme. Despite its abundant enthusiasm, the Economic Survey soberly concluded that UBI is “a powerful idea” that may “not [be] ripe for implementation” but that the concept “is ripe for serious discussion.”6

As of 2017, a basic income proposal would indeed be weak medicine for the chronic infirmities of India’s welfare system, given that the country’s uneven ability to plan and execute policies would hamstring any attempt to institute such a reform now.7 Further, the suggestion to finance a UBI largely by dismantling major existing welfare subsidies is concerning. It is unclear whether annual UBI transfers would offer sufficient recompense, and there is ample risk that, in seeking to pay the poor, a UBI may make the poor pay. Moreover, the Indian government’s desire to eschew true universal transfers in favor of quasi-universal grants for select populations would likely result in a basic income scheme that suffers from the inefficient means-testing that plagues current poverty reduction programs.

First and foremost, improving India’s technical and administrative capacity to implement a basic income system requires strong evidence that links a state-administered UBI with improved development outcomes. Real world pilots (hewing as closely to a strict UBI as possible) are needed to test the effects of unconditional cash grants at scale relative to those of status-quo programs. In addition to transfer amounts, such trials should look closely at the effectiveness of unsophisticated targeting methodologies, as well as non-Aadhaar-based alternatives for delivering direct cash transfers.

Notes

1 Paul Halsall, “Modern History Sourcebook: Jawaharlal Nehru (1889-1964): Speech on the Granting of Indian Independence, August 14, 1947,” Internet Modern History Sourcebook,Fordham University, October 1998, accessed January 19, 2018, https://sourcebooks.fordham.edu/halsall/mod/1947nehru1.html?Speech.

2 Gaurav Datt, “Poverty in India 1951-1994: Trends and Decompositions,” World Bank, August 1, 1997, http://documents.worldbank.org/curated/en/253831468049773494/Poverty-in-India-1951-1944-trends-and-decompositions.

3 Urmila Chatterjee, Rinku Murgai, Ambar Narayan, and Martin G. Rama, “Pathways to Reducing Poverty and Sharing Prosperity in India: Lessons From the Last Two Decades,” World Bank, January 1, 2016, http://documents.worldbank.org/curated/en/559851468910056173/Pathways-to-reducing-poverty-and-sharing-prosperity-in-India-lessons-from-the-last-two-decades.

4 The World Bank defines poverty as those living below the international poverty line of $1.90 a day. World Bank, Taking on Inequality: Poverty and Shared Prosperity 2016 (Washington, DC: World Bank, 2016), https://openknowledge.worldbank.org/bitstream/handle/10986/25078/9781464809583.pdf, 40.

5 Maddalena Honorati, Ugo Gentilini, Ruslan G. Yemtsov, “The State of Social Safety Nets,” World Bank, June 29, 2015, http://documents.worldbank.org/curated/en/415491467994645020/The-state-of-social-safety-nets-2015.

6 Ministry of Finance, Economic Survey 2016–17 (New Delhi: Government of India, 2017), 195.

7 Matt Andrews, Lant Pritchett, and Michael Woolcock, Building State Capability: Evidence, Analysis, Action (Oxford: Oxford University Press, 2017), 22.