A small Indian state could become the country's first to introduce universal basic income

• The ruling party in the Northeast Indian state of Sikkim has announced that it plans to make a Universal Basic Income (UBI) policy a key part of its re-election manifesto ahead of state polls this year.
  
• If the SDF is elected again, the party, which is led by the state’s longest serving chief minister Pawan Chamling, plans to implement the policy by 2022- becoming the first state in the country to do so.
  
• Sikkim, India’s least populous state, could serve as a good testing ground for the policy, which is being increasingly debated over even at the central level.

As the rest of India debates whether the government should give every citizen a minimum amount of money for subsistence, the government in Sikkim has made a promise to its voters.

The party in power in the Northeast Indian state of Sikkim, the Sikkim Democratic Front, has announced that it plans to make a Universal Basic Income (UBI) policy a key part of its re-election manifesto ahead of state polls this year, according to media reports citing a Member of Parliament from the party, Prem Das Rai.

If the SDF is elected again, the party, which is led by the state’s longest-serving chief minister Pawan Chamling, plans to implement the policy by 2022.

It is already said to have started assessing the requirements for rolling out a direct cash transfer scheme. This will be another big milestone for the Himalayan state, which already has the distinction of being the least populous and fully organic .

In January last year, the IMF proposed the policy as an alternative that would replace the many social support schemes as well as food and gas subsidies.

The proposal has had its champions even in India. In the Economic Survey in 2017, the then chief economic advisor Arvind Subramanian pegged the cost of offering UBI to 75% of the population at around 5% of GDP.

India has had a number of small experiments with UBI but none that involved a state-wide approach. In 2013, the Self-Employed Women’s Association, an NGO, began a pilot in eight villages in Madhya Pradesh in tandem with UNICEF.

The results from the experiment indicated an improvement in living outcomes, especially for the poorest households, including a higher savings rate, nutrition intake and school enrollment.

However, one of the major arguments against the implementation of a national UBI policy in India is the country’s population. With 1.35 billion residents, a mere fraction of which pay taxes and a majority of which are informal workers, the numbers just aren’t in the country’s favour especially as it tries to keep a ballooning fiscal deficit in check.

In June 2017, just a few months after announcing the potential launch of a state-wide pilot, Finance Minister Arun Jaitley said that a UBI policy may not be “politically feasible” given the opposition from different parties to the rollback of welfare schemes.

Why Sikkim?

It seems that starting out small is the best way to approach the policy and hence, Sikkim does seem like an obvious place to implement the policy because its estimated to be India’s least populous state. According to the 2011 Census, it had only 610,577 residents, a number that should reach 700,000 by the time the scheme is implemented. This, coupled with a gross secondary enrollment rate of a little over 90%, make it a suitable candidate.

Sikkim also boasts the fiscal strength required for such an undertaking, being one of the few states to have recorded a revenue surplus from tax collections so far this year. In addition to rolling back social schemes and subsidies, it could rely on a tourism tax as well as profits from state-backed energy ventures to fund the scheme.

Speaking to the Indian Express, Rai touted the expected revenue gains from the state’s hydropower projects. He explained that Sikkim’s hydropower capacity was set to increase to 3,000 MW within the next few years, 90% of which would be sold to power trading firms.


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