The contentious idea of whether a universal basic income (UBI) for the poor is better than subsidies gets full play in the Economic Survey 2016-17.
Chief Economic Advisor Arvind Subramanian, the author of the survey, has even calculated the UBI for 2016-17—Rs. 7,620—though UBI is still a concept. However, the government might consider to turn it into policy given the emphasis on cash-transfer infrastructure.
Subramanian writes it is not an easy calculation because it depends on a number of objectives and assumptions.
“Based on the 2011-12 distribution of poverty, it seems clear that going from a certain very low level of poverty to eliminating it will be prohibitively high. So, a target poverty level of 0.45 percent is chosen. Then the 2011-12 consumption level is computed for the person who is at that threshold. The next calculation is the income needed to take her above Rs. 893 per month, which is the poverty line in 2011-12. This comes to Rs. 5,400 per year,” he writes.
He scales up the number for inflation between 2011-12 and 2016-17 which yields Rs. 7,620 per year.
“The survey assumes that in practice any program cannot strive for strict universality, so a target quasi-universality rate of 75 per cent is set (this is later referred to as de facto UBI),” he says.
He also calculates the economy-wide cost of the UBI—4.9 per cent of GDP.