IMF, International Monetary Fund, says that if India ends subsidy on energy and food, then the Universal Basic Income (UBI) of Rs 2,600 per year can be made available to every person in the country. Since in the recent times, there has been considerable debate over the issue of UBI and it is being tested in many countries. The IMF has considered its prospects for India.
However, the calculation of IMF is based on the 2011–2012 data and there is a need to obliterate this data in view of the huge reduction in fuel subsidy and the distribution of other subsidies through the basis of the NDA Government. For such low amount of UBI, the fiscal cost of 3% of GDP will also come. However, it will be able to deal with certain issues related to fuel subsidies an
d public food distribution.
With this, the problems of getting a large share of the subsidized subsidy for the people of higher income can be overcome if there is no full coverage of Lower Income Group in the PDS. The IMF says that the debate about UBI is being done as a possibility of an alternative to government’s existing subsidy arrangement. The IMF believes that there are deficiencies in the present system of subsidy and owing to this, their benefits are not fully available to those sections that are entitled to it.
The UBI figure of Rs 2,600 has been calculated on the basis that it will replace food and fuel subsidy in the country. However, one of the other aspects is that there is a need to increase prices significantly to eliminate subsidy at large levels. The IMF has cited a study of 2016 for this. It says it will provide funds for UBI.
According to IMF estimates, annual UBI of Rs 2,600 is equivalent to about 20% of the per capita consumption in 2011–2012. The report of IMF says, “The potential benefits of implementing UBI will be needed to carefully plan to deal with political, social and administrative challenges, as the increase in prices is on a large scale to improve the subsidy system.”
The other side of this is that eradicating the wider financial support would necessitate a sharper augment in prices in the case after budget subsidies are aloof. The IMF cites a 2016 study that attaches the sort of increase at LPG (94%), diesel (69%), gasoline (67%), coal (45%), and kerosene (10%).