Universal Basic Income

“I will give you a talisman. Whenever you are in doubt, or when the self  becomes too much with you, apply the following test. Recall the face of  the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if  the step you contemplate is going to be of  any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self  melt away.” – Mahatma Gandhi

“Wiping every tear from every eye” based on the principles of  universality, unconditionality, and agency—the hallmarks of  a Universal Basic Income (UBI)—is a conceptually appealing idea. A number of  implementation challenges lie ahead, especially the risk that UBI would become an add-on to, rather than a replacement of, current anti-poverty and social programs, which would make it fiscally unaffordable.

Despite  making  remarkable  progress in  bringing  down  poverty  from  about  70 percent at independence to about 22 percent in  2011-12  (Tendulkar  Committee),  it  can safely be said that “wiping every tear from every eye” is about a lot more than being able to imbibe a few calories.  Gandhi ji intuited that  it  is  also  about  dignity,  invulnerability, self-control  and  freedom,  and  mental  and psychological  unburdening.  From  that perspective,  Nehru’s  exhortation  that  “so long as there are tears and suffering, so long our work will not be over” is very much true nearly 70 years after independence.

Universal Basic Income, ( UBI ) has three components:
  1. universality,
  2. unconditionality,
  3. and  agency

(by providing support in the form of cash transfers  to  respect,  not  dictate,  recipients’ choices).

  • Universal  Basic  Income is a radical and compelling paradigm shift  in thinking about  both  social  justice  and  a  productive economy.
  • It is premised on the idea that  a  just  society  needs  to  guarantee  to each  individual  a  minimum  income  which they can count on, and which provides the necessary material foundation for a life with
  • access to basic goods and a life of dignity. A universal basic income is, like many rights, unconditional and universal: it requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens.

The time has come to think of UBI for a number of reasons:

  • Social Justice
    • promotes many of  the basic values of a society which respects all individuals as free and equal.
    • It  promotes  equality  by  reducing poverty.
    • It promotes efficiency by reducing waste in government transfers.
    • And it could,under  some  circumstances,  even  promote greater productivity.
  • Poverty Reduction
    • Universal Basic Income may simply be the fastest way of reducing poverty.
  • Agency:
    • The poor in India have been treated as objects of government policy.
    • The circumstances that keep individuals trapped in poverty are varied; the risks they face and the shocks they face also vary.
  • Employment:
    • UBI is an acknowledgement that society’s obligation to guarantee a minimum living standard is even more urgent in an era of uncertain employment generation.
  • Administrative Efficiency:
    • In India in particular,the case for UBI has been enhanced because of the weakness of existing welfare schemes which are riddled with misallocation, leakages and exclusion of the poor.
    • UBI is not a substitute  for  state  capacity:  it  is  a  way  of ensuring that state welfare transfers are more efficient so that the state can concentrate on other public goods.

The conceptual case against UBI

From an economic point of view there are  three  principal  and  related  objections to  a universal  basic  income.
  •  The  first concern  is whether  UBI  reduces  the  incentive  to work
    • the levels at which universal basic  income  are  likely  to  be  pegged  are going to be minimal guarantees at best; they are  unlikely  to  crowd  incentives  to  work.
  • The  second  concern  is  this:  Should income be detached from employment?
    • The honest economic answer to this concern is that society already does this, but largely for the rich and privileged.
  • The  third  is  a  concern out of reciprocity.
    • If  society  is  indeed  a  “scheme of  social  cooperation”,  should  income  be unconditional,  with  no  regard  to  people’s contribution  to  society?
    • the  short  answer is that individuals as a matter of fact will in most  cases  contribute  to  society,
    • UBI  can  also  be  a  way  of acknowledging  non-wage  work  related contributions  to  society
    • homemaking contributions  of  women  are  largely unacknowledged  economically,  since  they do  not  take  the  form  of  wage  or  contract employment.  It  is  important  that  UBI  is not framed as a transfer payment from the rich to the poor.

What  would  a  UBI  potentialy  cost?

  • The income needed to take her above INR  893  per month (Tendulkar poverty line ), which is the poverty line in 2011-12. This comes to INR 5400 per year. Subsequently, that number is scaled up for inflation between 2011-12 and 2016-17: this yields  INR  7620  per  year.  This  is  the  UBI for 2016-17, which is  4.9 percent of GDP .

Issues to set up :

If  universality  has  powerful  appeal, it  will  also  elicit  powerful  resistance. Approaching  targeting  from  an exclusion of the non-deserving perspective than the current inclusion of the deserving
perspective.
  • Define the  non-deserving based on ownership  of  key assets such as automobiles or air-conditioners or bank balances exceeding a certain size. SECC
  • Adopt a ‘give it up’ scheme wherein those who are non-deserving chose to opt out of the programme just as in the case of LPG and are given credit for doing so.
  •  Introduce a system where the list of UBI beneficiaries  is  publicly  displayed;  this would “name and shame” the rich who choose to avail themselves of a UBI
  •  Self-targeting: Develop a system where beneficiaries regularly verify themselves in  order  to  avail  themselves  of  their UBI  –  the  assumption  here  is  that  the rich,  whose  opportunity  cost  of  time is higher, would not find it worth their while to go through this process and the poor would self-target into the scheme. The  issue  with  an  approach  of  this sort is that it conflicts with the essence of  JAM,whose  appeal  lies  in  its  direct, costless  transfer  of  the  state’s  welfare subsidies to beneficiaries’ accounts.
  • UBI must be embraced in a deliberate, phased manner. A key advantage of phasing would  be  that  it  allows  reform  to  occur incrementally.
  • A  UBI  for  women  can,  therefore,  not  only reduce the fiscal cost of providing a UBI (to about half) but have large multiplier effects on the household.

Sikkim Democratic Front (SDF) has decided to include Universal Basic Income (UBI)

  • Sikkim’s ruling Sikkim Democratic Front (SDF) has decided to include Universal Basic Income (UBI) in its manifesto for the upcoming assembly and Lok Sabha elections, according to a report by The Indian Express.
  • The state has already begun the process of introducing the unconditional direct cash transfer scheme and is planning to implement the same by 2022. It could become the first state in India to implement UBI.
  • The 2017 Economic Survey had advocated implementation of UBI as an alternative to the various social welfare schemes in an effort to reduce poverty.
  • The Survey said, “UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion.”
  • However, Finance Minister Arun Jaitley in June 2017 said the scheme as proposed in the Economic Survey will not be politically feasible in today’s India.