Universal Basic Income in Developing Countries: Issues, Options, and Illustration for India

July 31, 2018

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David Coady, and Delphine Prady. Universal Basic Income in Developing Countries: Issues, Options, and Illustration for India, (USA: International Monetary Fund, 2018) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper discusses two common arguments for the adoption of a UBI; that it can be a more effective way of supporting low-income households when existing safety net programs are inefficient, and that it can generate broad support for structural reforms. Using India as an illustration, the paper discusses the trade-offs that need to be recognized in adopting a UBI in these contexts. It shows that replacing the 2011 Public Distribution System (PDS) with a UBI results in losses for many low-income households, although much of this can be reduced by recycling the “out-of-system” PDS losses and the fiscal savings from excluding the highest-income groups as higher UBI transfers. In contrast, replacing inefficient energy subsidies—raising energy prices to efficient levels to internalize the negative environmental externalities of energy consumption—could simultaneously deliver unambiguous distributional gains, help address fiscal pressures, and improve energy efficiency with associated environmental and health gains. Implementing such reforms would, of course, require careful communication and implementation to address political barriers to reform.

Subject: Consumption, Energy prices, Energy pricing, Energy subsidies, Expenditure, National accounts, Personal income, Prices, Total expenditures

Keywords: Consumption, Distributional gains, Efficient energy pricing, Energy prices, Energy subsidies, Energy subsidy, Global, Government, Government price intervention, Income, Income decile, PDS subsidy, Personal income, Price, Safety net reform, Subsidy, Subsidy program, Total expenditures, Universal basic income, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/174
Stock No:

WPIEA2018174
ISBN:

9781484370049
ISSN:

1018-5941

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