Making a case for other UBIs in India

It took the COVID-19 pandemic to highlight the uncertainty of human society around the world. As the importance of social distancing came into focus after major waves of the pandemic, Debate on Universal Basic Income (UBI) resumes in policy circles around the world. However, there is another UBI that needs to be examined in the Indian context, that is, Universal Basic Insurance. Before discussing the second UBI, or insurance, it’s worth looking at the design options for Social Security.

types of safety nets

The income shock results in people living on the basic living line (say line 1) falling freely towards the critical survival line (say line 2). In any case, a fall below Line 2 needs to be stopped as it can be disastrous – a family could face a poverty trap. Social security systems are like a safety net placed on row 2. These social safety nets can be of three types. The first is a passive safety net that catches those falling from Line 1 and prevents them from falling down Line 2. The second is an active safety net that acts like a trampoline so that those who fall on it can bounce back on Line 1. The third is an active safety net that acts like a launchpad so that those who fall on it not only bounce back but also move past Line 1.

The first type of safety net is basically a social assistance program for the most income deprived sections of the society. The second type of safety net is a high outlay scheme. The third type of social safety net is the most desirable option, but it requires immense resources and institutional capacity. For Social Security, people at the southern end of the income line need social assistance plans. Those living at the northern end of the income line must have voluntary insurance.

Social security mainly includes food security, health security and income security. India operates a wide spectrum of social security schemes that cater to the largest number of people than any other country. The sheer scale of Indian social security programs in millions of households spread over a vast geographical area is mind-blowing.

For example, the Indian Food Security Program is providing heavily subsidized food grains under the National Food Security Act (NFSA) to over 80 crore beneficiaries. NFSA is the largest food security program in the world. Around 120 million children are provided free lunch under the mid-day meal scheme. In addition, around 50 million people benefit from the free food program run by some state governments. Nevertheless, the food security program has issues of financial stability and leakages.

for health and income

On the health security front, for the unorganized sector, the Ayushman Bharat scheme of the central government with more than 490 million beneficiaries. In the organized sector, the central government runs the Employees’ State Insurance Corporation (ESIC) and the Central Government Health Scheme (CGHS), which cater to 130 million and 40 lakh beneficiaries, respectively. About 20 crore people are involved in health insurance schemes run by various state governments. Only about 110 million people in India have private health insurance. Despite these massive provisions, around 400 million Indians are not covered under any form of health insurance.

Income tax is the hardest part of tackling in the Social Security basket. For the organized sector, there are three types of provident fund schemes: General Provident Fund (GPF) which is benefited by about 20 million central and state government employees in the country. The other is Employees’ Provident Fund (EPF) which is availed by about 65 million workers in other organized sector. The third is the Public Provident Fund (PPF), which can be availed by any Indian citizen, but it is mostly contributed by the organized sector. There are about 53 million New Pension Scheme subscribers in the country (about 2.2 million in the central government, 5.6 million in the state government and the rest in the private sector).

In the unorganized sector, about 12 crore farmers are availing the benefits of Pradhan Mantri Kisan Maan-Dhan Yojana (PM-KMY) and PM-Kisan Yojana. Atal Pension Yojana (APY) benefits 40 million people. The Pradhan Mantri Shram Yogi Maandhan Yojana has about five million beneficiaries, while the National Pension Scheme for Traders and Self-Employed Persons (NPS-Vyapari) scheme has around 50,000 beneficiaries. The biggest income security program of the unorganized sector is the scheme under the Mahatma Gandhi National Rural Employment Guarantee Act, which has about 60 million beneficiaries. Thus, out of 500 million workers in India, about 100 million have no income security (pension, gratuity or other income) coverage. Proponents of universal basic income cite the informality of the Indian economy as a hindrance to the implementation of schemes such as unemployment insurance in the country. However, apart from the huge financial impact (about 4.5% of GDP), the proposal for universal basic income runs the risk of implementation failure largely due to beneficiary identification requirements.

Why UBI

The other UBI, i.e. Universal Basic Insurance, is a better proposition for two reasons. One, insurance penetration (premium as a percentage of GDP) in India has been hovering around 4% for several years compared to 17%, 9% and 6% in Taiwan, Japan and China respectively. Two, although the economy remains largely informal, data for that informal sector is now available for businesses (via the GSTIN, or Goods and Services Tax Identification Number) and for unorganized workers (via e-labor, which is a part of all the unorganized sector). centralized database) is available for both. staff). As a result of recent initiatives by the government, the Goods and Services Tax (GST) portal has 13.5 million registrations and the e-Shram portal has over 280 million registrations. As a prototype of a social security portal based on such data, ‘Kutumba’, a social registry portal developed by Karnataka, is available as a blueprint. Till there is sufficient voluntary insurance in the Indian economy, social security can be promoted through the scheme of universal basic insurance.

Rajesh Gupta is a Research Scholar