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Right Way of Implementing Universal Basic Income in India

Published on Wednesday, March 29, 2017
Right Way of Implementing Universal Basic Income in India

Understanding the meaning of Universal Basic Income(UBI)

  • For the first time, the idea of an unconditional basic income appeared in the middle of the 19th century after combining the concepts of Minimum Income(16th century) and unconditional one-off grant(18th century). 
  • A Universal Basic Income(UBI) is a form of social security in which all individuals (not households) of a country regularly receive an unconditional sum of money from the government in addition to any income received from elsewhere. 
  • A universal basic income is just like any other Fundamental or Constitutional right, it gives every person a right to a basic income to cover their needs, just by virtue of being citizens. 
  • UBI, when carefully analysed and successfully implemented, can have many potential benefits for the betterment of not only poor citizens but also for the middle-class families of a country. 
  • UBI can make a citizen an agent of its own change and thus can help in promoting social justice and reducing poverty. Also, this income floor can provide a safety net against health, income and other shocks which directly helps the poor people in the country. 

Universal Basic Income(UBI) for India

  • Despite making significant progress in reducing poverty from about 70% at independence to 22% in 2011-12 (as per Tendulkar committee report), we are still behind our goal of Zero or negligible poverty. For achieving this goal of zero poverty, UBI can be a better anti-poverty programme with minimum leakages compared to the vast range of subsidies currently given by the government under many anti-poverty programmes. 
  • Analysis of the public distribution system (PDS), Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and Mid Day Meal (MDM) shows that all of them gives evidence of misallocation of resources due to which many of the poorest districts in the country got lesser funds while others received more than the proportional share of the spending. 
  • If a district with poorer is allocated very little funds, then it is certain that some of the deserving households would remain excluded. 

Challenges in Implementing Universal Basic Income(UBI) in India

  • UBI for the entire population of India would cost Rs. 15.6 lakh crore annually i.e. transferring Rs. 1,000 per month to all Indians would cost Rs. 1,000 X 12 months X 130 = 15.6 lakh crore a year. At present, Indian government do not have this magnitude of fiscal resources. 
  • So, the only way out for the government is that it can start with Rs. 500 per month per adult. But if UBI is introduced with existing statutory income transfer schemes for food and wage jobs(MGNREGA), the government's fiscal deficit will significantly increase. 
  • Therefore, the government have to find resources either through reducing subsidies to a great extent or other means. 
  • There are also some social challenges which downgrade the benefits of this(UBI) radical and compelling paradigm shift in thinking about both social justice and a productive economy. For example, Indian Gender norms may dominate the sharing of UBI within a household i.e. men are likely to control the spending of the UBI. 
  • Also, a minimum guaranteed income from the government might make people lazy and opt out of the labour market. In the case of failure of the UBI Scheme, it may become difficult for the government agencies to wind up this scheme. 
  • Unlike food subsidies which do not depend on the fluctuating market prices, a cash transfer's purchasing power may severely be affected by market fluctuations. 

The Possible Right Way of Implementing (UBI) in India

  • In the first step, the UBI scheme can be tried in the most disadvantaged regions of the country, rather than making it universal to start with. And after observing the results of this sample implementation, government can find a right way for implementing UBI with minimum risk. 
  • UBI for all Indians won't be affordable unless it eliminates the whole multitude of programmes and subsidies currently in place. During 2016-2017, the Indian Government spend Rs. 2.5 lakh crore on subsidies, with other Rs. 38,500 crore which was allocated for rural employment guarantee scheme(MGNREGA). In India, there are a lot of subsidies which constitute a significant portion of GDP. For example, fossil fuel subsidies are large and do not directly go to poor. 
  • MGNREGA and other welfare or anti-poverty schemes do not work very well and cost a large amount. PDS has failed to target many BPL people. 
  • According to experts, after computing on the basis of assumed consumption levels(quasi-universality rate 75%) just above the poverty threshold, UBI in India would be in the range of between Rs. 6540 and Rs. 7620 per capita per year, which would cost 4.2% to 4.9% of the GDP. 
  • And this figure is well within the boundary of 5% of the GDP, which is what existing centrally sponsored schemes cost the taxpayer. 
  • There is also a possibility of implementing this scheme only for BPL households. Making UBI for BPL households would reduce the burden on government. 
  • But this creative plan of implementing UBI for only BPL households may fail because of identification issues. 
  • BPL system usually takes a long time to measure the numerical figure of poor people. Also, there could be changes in the figure of the BPL population, as some people may move above and below the poverty line. So, it is difficult to achieve success with this method. 
  • And therefore, using the quasi-universality rate for implementing UBI may give better results. 
  • The success of the UBI highly depends on the financial inclusion of the country. 
  • Financial inclusion would bring in administrative efficiency as a direct cash transfer through a JAM(Jan Dhan-Aadhar-Mobile) platform would be more efficient as compared to the existing schemes which are infected with misallocation, leakages and exclusion of the poor. 
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