NEW DELHI: Universal Basic Income scheme, proposed in the Economic Survey, will work only if ‘wasteful’ subsidies are phased out, Chief Economic Advisor Arvind Subramanian said. He was interacting with the public through a Face Live session on Thursday.
During the session, Subramanian spoke at length addressing the vexed issues of UBI, the government’s efforts on the remonetisation front, subsidies in the Indian system, and digitisation.
Subramanian is the author of the Economic Survey. With an audience of nearly 5,000 on Facebook and over 400 questions, Subramanian called the exercise ‘democracy at its best’.
Clarifying what UBI would mean, he said the UBI scheme guarantees certain basic standards of living to go above the poverty line. “In principle, it is universal but in practice we want some people to exclude themselves from the threshold. By ‘universal’ we mean de jure or quasi universality.” The word ‘basic’ implies that the amount of money will guarantee a basic standard of living for the people. He added, “In practice, there may be problems giving money to everyone – the richest and the poorest cannot get the same amount of money.” He noted that UBI is an idea with a lot of benefits and potential costs but it is not impossible to implement. For the success of UBI, he said the government should phase out ‘wasteful and ineffective’ subsidies many of which are going to the middle class.
On the prospects of embracing a digital economy, he said, “What needs to be kept in mind is that not everyone can go digital. With 35 crore people with no phones at all, cash will continue to remain important.”
Taking a dig at richer states such as Gujarat, which had been offering incentives to attract investments, he said: “With the coming of the goods and services tax (GST) no state can charge higher taxes and none can offer rebates or incentives to attract investments.”
The rich states were always better positioned to offer incentives unlike the poorer ones because of larger resources. This inequality will now be balanced by the GST.
On education, he said investment in the sector needs to bring in value for money since 50 per cent of school teachers don’t show up. He said education is a priority for the government and that expenditure on education is to the tune of two to three per cent of GDP.