February 6, 2017

AND HAVING GOTTEN RID OF CASH MAKES IT EASIER:

Bonfire of the subsidies : India debates the case for a universal basic income (The Economist, 2/03/17)

The Indian government this week floated the idea of replacing most of these schemes with a "universal basic income" (UBI), an unconditional cash payment that could be disbursed not just to the poor but to everyone (see article). In rich countries, the UBI is raised as a possible response to a world where artificial intelligence and automation put large numbers of people out of a job. But unless technology destroys jobs on an unprecedented scale and creates none in their place, the case for such a scheme is premature. Functional social-safety nets and instruments such as tax credits make it possible to direct money to the needy in these countries. In India, despite its practical difficulties, the idea has a different logic and deserves a more sympathetic hearing.

For one, a little money would go a long way for India's poor. Over a fifth of its population lives below the poverty line. The scheme outlined this week by the chief economic adviser to the Indian government, Arvind Subramanian, would cut that figure to less than 0.5% by transferring about $9 a month to all adult Indians. If doled out to everyone, that would cost around 6-7% of GDP; the 950 welfare schemes soak up 5% of GDP.

Giving people cash would be far better than today's system of handing out welfare in kind. The plethora of schemes in place for Indians to claim subsidised food, fuel, gas, electricity and so on are inefficient and corrupt.

Posted by at February 6, 2017 8:19 AM

  

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