We make space for so many vanity projects, UBI is not impossible to implement: Economist Abhijit Banerjee

11 March 2019
Abhijit Banerjee, a professor of economics at the Massachusetts Institute of Technology, is advising the Congress on the feasibility of its proposed minimum-income guarantee scheme.
Saumya Khandelwal/Hindustan Times/Getty Images
Abhijit Banerjee, a professor of economics at the Massachusetts Institute of Technology, is advising the Congress on the feasibility of its proposed minimum-income guarantee scheme.
Saumya Khandelwal/Hindustan Times/Getty Images

On 28 January, just days before the Bharatiya Janata Party-led central government announced its interim budget, the Congress president Rahul Gandhi declared that if voted to power, his party would implement a minimum-income guarantee scheme for the poor, “to help eradicate poverty and hunger.” The scheme would entail guaranteed cash-transfers to specific sections of India’s population and is an adaptation of Universal Basic Income, or UBI. Modern economics defines UBI as “periodic cash payment, unconditionally delivered to all on an individual basis, without work requirement.”

As state policy, UBI first gained traction in India after Arvind Subramanian, the former chief economic adviser, mooted the idea of a quasi-UBI in his Economic Survey of 2016-2017—an annual flagship document compiled under the aegis of the ministry of finance that provides detailed statistical data and analysis of the country’s economic performance and outlook. Since then, a number of states, including Odisha and Telangana, have announced variants of UBI in the form of direct cash-transfers to poor farmers, while Sikkim has proposed introducing a universal income guarantee by 2022. In February this year, the central government rolled out a similar scheme for small and marginal farmers, which promised Rs 6,000 per annum in three instalments.

Recently, Thomas Piketty, a French economist, confirmed that he and Abhijit Banerjee, a Ford Foundation professor of economics at the Massachusetts Institute of Technology will be advising the Congress on its scheme. Banerjee and Piketty are also closely associated with the World Inequality Database, or WID, an open-source database on the historical evolution of income and wealth distribution.

Rohit Inani, a journalist based in Delhi, interviewed Banerjee. They discussed the feasibility of minimum-income guarantees in India, including the fiscal and social challenges of implementing the scheme. For the scheme to work in the long term, Banerjee said, “We will have to re-capitalise the banks, so that they stop being zombies, and start doing their job.” He continued, “The question that the political system needs to answer is—would you rather have some poor people left out or would you have some poor get more money?”

Rohit Inani: You and Thomas Piketty are advising the Congress on its minimum-income guarantee scheme. How did this come about and how closely are you engaging with the party on this?
Abhijit Banerjee: Just a day after Rahul Gandhi announced this scheme, Praveen Chakravarty, [the head of the Congress's data-analytics department] who is an old friend, emailed me saying, “Look, this is the announcement. Can you help us get a sense of the magnitude of this commitment?” We were not involved in their planning. The WID is set up for exactly this purpose, which is to provide information to whoever needs it to deal with inequality, poverty. And Thomas Piketty and I are involved with [the WID] together, and we provided them with our guess on what the numbers should be. The Congress is seriously pursuing this idea, asking questions about its feasibility, et cetera.

Rohit Inani is a journalist based in Delhi. He has contributed to TIME, The Nation and Himal Southasian, among other publications.

Keywords: Elections 2019 Abhijit Banerjee Minimum Income guarantee universal basic income Thomas Piketty Cash Transfers inequality poverty Subsidy Congress BJP
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