Article: Sikkim and its Universal basic income experiment

Compensation & Benefits

Sikkim and its Universal basic income experiment

Tucked in the foothills of Himalaya, one of the least populated but well-performing states in India, Sikkim has announced that it will undertake the implementation of a Universal Basic Income scheme by 2020. We look at some of the potential impacts of such a move.
Sikkim and its Universal basic income experiment

The concept of providing a basic income has over the years gained traction in various economies across the globe. Considered to be one way of ensuring that economic growth of a country translates into an economic benefit of the individual, basic income, often with its prefix of ‘universal’ demarking its holistic and unbiased application, is becoming an option that many governments have begun experimenting with. And often not without good reason. 

In light of how rapidly modern day economies are evolving, newer mechanisms of transferring economic benefits are to be considered. The old adage of the trickle-down effect has been far less satisfactory, and in the case of countries like India, economic and income inequality has been on the rise. The country has also faced a period of jobless growth, where rising GDP and positive economic performance didn’t necessarily lead to the creation of newer, better-paying jobs. This, at a time when the domestic labour market is expanding and more and more job seekers enter the labour market every year, the importance of having alternate economic measures in place need be discussed and experimented upon. 

In a similar endeavour, Sikkim recently went ahead and said that the sate will be piloting the country’s first-ever statewide universal basic income plan. Still, in its planning phase, the Sikkim government recently announced, through its election manifesto, that if elected in 2020 the Sikkim Democratic Front would go on to implement a UBI across the state. Although the final implementation still depends on how the election results pan out, the introduction of UBI within the ambit of election promises shows its growing popularity, and need, within a developing nation like India. 

And Sikkim seems just about the right state to experiment with such scale of UBI implementation. 

Sikkim in the past has undertaken various policy shifts that have today created a much-balanced society. The state boasts one of the best employment rates among women across India, in addition to significant growth in literacy rates across the state. Over the years, the state has shown how progressive policymaking has paid up in areas of administration, education, and poverty reduction. Sikkim has a literacy rate of 98 percent and its monthly per capita expenditure in rural areas is Rs 1,444.06 and it is Rs Rs 2,538.11 for urban areas. The BPL percentage has come down from 41.43% in 1994 to 8.19% in 2011-12. Therefore it comes as little surprise if Sikkim decides to be one of the first states in India to look at providing a Universal Basic Income. The SDF party today is well positioned to implement a program which would reach to over 7 lakh local residents in the state. 

But before we delve into the specifics how the political party intends to implement a statewide basic income scheme, its necessary to look at some of the debates around Universal Basic Income, and its impact within the domestic markets. By definition, UBI is a fixed amount of income transferred by the government to every citizen irrespective of economic wealth and employment status. Many experts have considered this as an alternative to other forms of welfare measures like subsidies and cash transfers. This idea, of having unconditional monetary support, up to a certain amount, to both rich and poor alike has been a concept that’s been going round in many developed economies in the west. But the changing nature of work and how often jobs creation and economic growth don’t go hand in hand, India in recent times has begun discussing the benefits of UBI over other welfare schemes to address the problem of poverty and income inequality. This was the conclusion the Economic Survey 2016-17 which flagged that the Universal Basic Income (UBI) scheme was “a conceptually appealing idea” that could work as an alternative to the various social welfare programmes that are targeted at reducing poverty. Since then many experts, like former Chief Economic Advisor Arvind Subramanian who recently wrote on how it imperative that India begins implementing UBI across various regions—are among a growing majority who prefer UBI as better welfare scheme. 

The IMF too seems to be in agreement. In a discussion where the relevancy of UBI over other welfare schemes was considered, the IMF weighed in saying that such move (implementing UBI) was a better option than current food and fuel subsidies. In a report back in 2017 it expands how a “UBI would outperform the PDS and energy subsidies along three key dimensions of coverage, progress and generosity”

But irrespective such stance of UBI many remain critical of the concept, both in principle and when it comes to implementation. While some site how a basic income might lead to the workforce becoming more lack, many question the implementation of any large scale direct cash transfers. Family dynamics and societal settings have shown earlier that cash transfers have done little to improve conditions of families below the poverty line. Basic income might be provided to every household, but given its nature, many women might not have access to such an increased income. Thus the right mixture of UBI and welfare scheme might be the right way to go ahead. Finally, the budgetary pressures of such moves can also lead counterintuitive results.  

This reportedly has already thought out by the ruling SDF government in Sikkim. Concerning the “affordability” of the scheme, a report in Indian Express added, that the successful implementation of the hydropower projects by the state has made it a surplus power generating state. “The state produces 2200 MW and it will go up to 3000 MW in the next few years. The state’s requirement is only 200-300 MW and the rest goes to power trading firms. When this money comes in, we as SDF feels its people’s money and it should be utilized for them.”

“The process has already started in Sikkim,”  added Prem Das Rai, SDF MP in the Lok Sabha speaking to Indian express. The idea is to subsume other subsidies and allowances in order to provide a particular amount every month to people. Rai said it would “work well for the youngsters” because “it would give freedom to choose their work, it will be more futuristic and it will serve as a future production tool. Young people can look into the future without worrying too much about income,”. With the changing of workplace skill preferences, such institutional support might just become necessary. But before that pilot programs like this, if completely implemented, will have to be closely monitored to ensure better models of implementation arrive in the future.  

 

Topics: Compensation & Benefits

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