Washington: The IMF on Sunday shot down media reports speculating that it was pushing for the Public Distribution System (PDS) to be replaced by the Universal Basic Income (UBI) in India.
The reports emerged in a section of media after the International Monetary Fund (IMF), in its annual Fiscal Monitor report, said the UBI will outperform the PDS in terms of coverage, progressivity, and generosity.
The IMF’s observation was based on the results of a microsimulation analysis of a policy reform that replaces food and fuel subsidies in India with a UBI.
Director of Fiscal Affairs Department of the IMF, Vitor Gaspar, said the report on India was just a case study on UBI and was carried out in order to demonstrate as to how a large but inefficient scheme can be replaced.
“We don’t regard Fiscal Monitor as advocating for or against UBI. This is not the case at all,” Gaspar said.
“No! The goal was not to advocate UBI. It was to use the UBI as an illustration of how one could replace existing large and macro economically significant schemes that are inefficient and inequitable,” he said.
The top IMF official said their report was based on the set of subsidy schemes, including energy subsidies and PDS schemes, that existed in India around 2011.
“We looked at these subsidies and we documented how a reform that would consider the replacement of these subsidies by the UBI would look like; then, we show that from 2011 to now, India has changed a lot,” Gaspar explained.
“Hence the example that we present does not apply to the India of today. Today’s India is a completely different place than what it was in 2011,” the top IMF official said.
Gaspar said the IMF opted for India as a case study mainly because the UBI is particularly attractive when it replaces inefficient and inequitable public spending programs.
“And it turned out that the subsidy schemes that prevailed in India in 2011 were indeed inefficient and inequitable. And that’s one of the reasons why they were so deeply reformed over time,” he said.
“Doing a case study on India does not mean that the IMF is supporting the UBI in India,” he reiterated.
Gaspar said that the IMF only intended to engage in a conversation that would allow it to collect facts and arguments relevant to policymakers and politicians and eventually help them make the best decisions for their countries.
“That’s the type of conversation we thought was useful to engage them on, trying to look at what are the relevant facts and arguments so that we can have a meaningful policy conversation,” Gaspar said.
The Fiscal Monitor is not advocating for specific reforms for individual countries, Gaspar said.
“That’s something that depends a lot on the particular circumstances of the country and we engage in that exercise year after year with countries in what we call ‘Article IV consultations’,” Gaspar said.
“One should also take into account broader ramifications such as the public spending programmes that are being replaced and other financing sources,” he said.
A UBI is equal cash transfer to all individuals in a country.