By Lalit K JhaWashington, Oct 11 (PTI) The Universal Basic Income,which is currently being debated in India, will outperform thePublic Distribution System (PDS) in terms of coverage,progressivity and generosity, the IMF said today.
The International Monetary Fund (IMF) said itsobservation is based on the results of a microsimulationexercise it conducted on India.
In its annual Fiscal Monitor report, the IMF carried aspecial box on the results from the microsimulation analysisof a policy reform that replaces food and fuel subsidies inIndia with a Universal Basic Income (UBI).
Noting that the need to reform existing subsidyprogrammes in India has recently gained momentum, the IMF saidpart of policy debate has focused on the potential role of theUBI as an alternative to the existing system of statesubsidies, which are typically characterised as fraught withinefficiencies and inequities.
The UBI will outperform the public distribution systemin terms of coverage, progressivity and generosity, it said.
The simulations are intended to illustrate the potentialbenefits from using a UBI both to reform a current butinefficient social safety net (in this case, the PDS) and togenerate public support for an ambitious fuel price reform.
Based on India’s 2011–12 National Sample Survey, theanalysis assesses the welfare impact of replacing thesubsidies that existed in that year with a UBI in a fiscallyneutral manner.
The IMF said the fiscal envelope devoted to the UBI isequivalent to the combined fiscal cost of the PDS and energysubsidies in 2011–12, which would finance an annual uniformUBI for every person in India of Rs 2,600 rupees (about USD54) in 2011–12, equivalent to about 20 per cent of median percapita consumption in that year.
Although such a transfer is more modest than that oftendiscussed in public debate, it would still incur a fiscal costof approximately three per cent of the GDP, the IMF said.
The report notes that since the analysis is anchored in2011–12, it does not take into account the significant subsidyreforms enacted by the government of India in recent years.
In general, reaping the potential gains from theintroduction of a UBI would need careful planning to overcomepolitical, social and administrative challenges, especiallywhen subsidy reforms involve such large price increases, itsaid. PTI LKJ NSA AKJZH.
This is unedited, unformatted feed from the Press Trust of India wire.