UNIVERSAL
BASIC INCOME – ECONOMY
News:
Rajasthan govt tables
Bill to guarantee minimum income
What's
in the news?
● Aiming
to support individuals and households of the state with an “additional income”,
the Ashok Gehlot government tabled the Rajasthan Minimum Guaranteed Income
Bill, 2023.
Universal
Basic Income (UBI):
● It
is a guaranteed regular cash transfer by
the Government to all citizens irrespective of their income or financial
condition.
● As
a universal safety net, UBI will be applied to all individuals, irrespective of
income and age.
● The
Economic Survey (2016-17) had noted that the UBI has 3 components namely,
○ Universal:
UBI will cover all citizens.
○ Unconditional:
UBI has no criteria to select the beneficiaries.
○ Agency:
Providing support in the form of cash transfers to respect, not dictate,
recipients’ choices.
Uniqueness
of UBI:
● UBI
is supposed to be easily accessible,
periodic, in the form of funds (and not vouchers or coupons) and is paid to
individuals not households.
● Since
governments commit to a legally stipulated and equal financial grant, it is
also considered to be a form of social welfare, especially for those who are
unemployed, sick and at the end of their working life.
Major
social safety measures in India at present:
● India spends about 2% of its GDP on
core social protection and welfare schemes.
● Some
of India's key flagship welfare schemes include MGNREGS, PM Kisan Samman Nidhi
Yojana (PM Kisan), and National Social Assistance Programme, among others.
Benefits
of implementing Universal Basic Income:
1.
Tackling Extreme Events:
● A
basic income support to everyone will help the masses in developing strong resilience
against extreme events like COVID-19
Pandemic, or other shocks like natural disasters (floods, tsunami,
earthquakes etc.).
● Multiple
reports have shown that most of the rural poor have become financially
vulnerable while the poorest of the poor are virtually going hungry because of
pandemic impact.
● Similarly,
UBI will help the masses face price shocks arising due to global conflicts. The
Russia Ukraine conflict has pushed
up the oil prices which has increased inflation levels in India.
2.
Economic Revival:
● The
recent pandemic has forced shut many enterprises and resulted in huge layoffs.
● This
has diminished the consumption demand in the economy, UBI can be helpful in
reigniting the demand and revive the economy.
3.
Ensuring Dignity:
● An
assured periodic cash transfer would allow every individual to live a more
dignified life thereby upholding the Right
to Life under Article 21.
4.
Social Justice:
● A
society that fails to guarantee a decent minimum income to all citizens will
fail the test of justice.
● Hence
UBI, by guaranteeing a minimum unconditional income, promotes social justice.
5.
Promotes Efficiency:
● UBI
seeks to replace the existing myriad subsidies given by the government under
its social welfare schemes that are riddled with misallocation, leakages and
inclusion/exclusion errors.
● There
will be no exclusion errors and the
implementation costs will come down due to direct transfer of cash through
existing systems and infrastructure.
6.
More Choices:
● UBI
is not tied to the recipients’ behaviour, and they are free to spend the money as they wish. This is in contrast to the
conditional in-kind transfers that limit the options for beneficiaries.
● UBI
will entrust them with the responsibility to devise their own spending
proportions for utilities and other goods
Challenges
in implementing Universal Basic Income:
1.
Fiscal Stress:
● Implementation
of UBI would require a huge amount of money which is difficult to arrange
considering the widening fiscal deficit
of the government.
● Covering
about a billion beneficiaries would cost INR 12 trillion (annual) just for each
adult to get a monthly INR 1,000 (or INR 12,000 annual).
2.
Subsidy Withdrawal:
● Post
UBI the government may phase out
critical subsidies like power, water, fertilizer etc. which may cripple
many enterprises in the agriculture and industrial sector.
3.
Universal Nature:
● UBI
would require providing benefits to also about 78% of the population who do not
fall in the poverty bracket. This means the amount paid to each individual may
be too small to have any significant impact on people’s lives.
● Moreover,
the universality of the transfer does
not address the aspect of equity.
4.
Improper Human behaviour:
● Recipients
might misuse the money they receive and undermine
social security objectives.
● Further
UBI will induce people to work less or create a disincentive to work.
● A
2018 study on the behavioural effects of cash transfers found just a 1% drop in
labour supply induced by a 10% income boost.
WAY
FORWARD:
● The
government can rethink true universality, as the well-off can be omitted from
the cash transfer schemes. There can be automatic
exclusion of certain classes of citizens (like possession of certain assets).
● After
deciding the quasi basic income criteria, the Government should leverage the
potential of JAM trinity (biometric identification, financial inclusion, and
mobile penetration) for directly transferring cash to household bank accounts.
● UBI
must be embraced in a deliberate and
phased manner. Gradualism can be adopted in following ways such as
○ Giving
choice to individuals between UBI and existing schemes
○ UBI
for women only
○ Universalize
UBI across some specific vulnerable groups only like for widows, pregnant
mothers, the old and the infirm.
○ UBI
in urban areas only which have good banking infrastructure and financial
inclusion.
○ UBI
for a class of sections like implementing for the poor at the bottom 25%.
● Focus
should be placed on equitable access to
education and creation of more jobs along with a vision to attain a long-term
growth rate. This would be more beneficial in poverty and inequality reduction
rather than merely giving guaranteed incomes.
It may not be feasible to have a basic income that is
universal or to substitute existing welfare subsidies. A UBI in India could be
implemented as a supplemental, unconditional, recurring cash transfer to the
target population while keeping the existing welfare infrastructure intact. UBI
can be a potent complement to broader poverty eradication programmes.