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The idea of Universal Basic Income keeps appearing in debate, however, there are various arguments surrounding it.
It is a form of cash transfer to every member of society without any conditions or criteria attached to it.
It is paid on an individual basis to every person regardless of social status or income.
It is unconditional in nature.
Payments are made on a regular basis to ensure a steady income flow.
The transfer is designed in such a way that it covers the basic living expenses of an individual or a family.
There are debates surrounding the suitability of UBI in India with some sections of society supporting it and others rejecting the idea.
As per the Economic Survey 2023-24, the Indian agriculture sector employs 42.3% of the population with only 18.2% share in the country’s GDP at current prices. A UBI like scheme could help in the transition of surplus agricultural labourers to more productive sectors.
India is criticised for having a fragmented social security system. Total expenditure on Central Sector Schemes reached ₹14.45 lakh crore in 2022-2023.
The National Food Security Act covers 67% of the population, but over 91 million eligible individuals are excluded from benefits.
UBI could simplify the social security system and make the schemes targeted for specific vulnerabilities without the complexity and errors of existing schemes.
Direct cash transfers will ensure transparency as there will be no middle mean and long paperwork involved than targeted subsidy programs.
UBI will enhance the consumer spending and it will also ensure increase in disposable income, which in turn will lead to economic growth.
India is in a phase of its demographic transition and India is the youngest country with a median age of 28.4 years.
According to the latest data from the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India stood at 8.5 percent in August 2024 and the youth unemployment was 24% in 2023-24, as per ILO estimates.
UBI could empower young people to invest in skills, entrepreneurship, or higher education, which will create a pool of a more skilled workforce.
UBI could also support the gig economy workers, a sector where there is significant youth working in India, whose numbers could exceed 23 million by 2029-30, as per a NITI Aayog report.
The State of Food Security and Nutrition in the World, 2023 report highlights that more than 74% of the Indian population can not afford a healthy diet, and around 40% of the people lack adequate micronutrients in their diet.
The Global Hunger Index for 2024 places India in the 'serious' level of hunger category with the rank of 105th among 127 countries.
The UBI could provide the choice to people to afford the necessary diet for their survival and reduce hunger in India.
According to the National Sample Survey report women spend 300 minutes a day on unpaid domestic services and men spend only 98 minutes.
As per the same report Only 22% of women in the 15-59 years age group were engaged in paid work while the figure was nearly 71% of men.
UBI could provide women, particularly those in rural and low-income households, withdirect
cash transfers, helping improve their financial independence.
Universal Basic Income: Arguments against Critics argue that with the people receiving a guaranteed income, the motivation to work will be reduced as they will believe that they can rely solely on UBI. It goes against the Gandhian ethos of wealth without work is a sin.
The UBI provides support to even the rich and they can earn without effort. The rich who do not require support will also benefit.
The Economic Survey of 2016-17 proposed a UBI of ₹7,620 annually per person, which is 4.9% of GDP. However, this would be inadequate. A realistic transfer to effectively eliminate poverty would require at least 7.5% of GDP as noted by the Observer Research Foundation.
Financing UBI by cutting the funding to existing subsidies could harm essential services. If the government reduces spending on education and healthcare to fund UBI, people may have cash but lack access to necessary services.
Erosion of Real Benefits: Cash transfers may not translate into real improvements in quality of life because it is up to the recipients where to spend the cash. They might spend the cash on unproductive areas or products.
Impact on ease of doing business: Implementing a comprehensive welfare state within the existing capitalist framework is challenging. The imposition of tax or increase in taxation to finance the UBI would disincentive the investors to invest in India.
Until the finalisation of UBI, individual rights like the right to quality education, healthcare, food, and employment should be prioritised. These rights can provide a more substantial safety net and ensure that people have access to essential services.
As per the McKinsey report, to establish a true welfare state with rights to food, employment, healthcare, and education. India would require an additional 10% of GDP. To finance this, the government would need to raise about 7% of GDP through taxation, primarily targeting the wealthy.
Effective UBI requires a broader framework that addresses systemic issues rather than simply providing money. There is a need to reduce the leakages in the current subsidies and welfare schemes. There is also a need to reform the existing schemes as well as the bureaucracy to make them more efficient.
It is a type of transfer which can be accessed based on people's needs, and targeted transfer to the very poor, preventive care and children’s education. Abhijit Banerjee, in his book Good Economics for Hard Times, mentioned this concept,
Arvind Subramanian gave the idea of quasi-basic income which aims to provide conditional transfer as per the capability of the state.
Former RBI governor, Bimal Jalan suggested that a basic income must be above the poverty line. He suggested a reduction in subsidies and merging conditional cash transfer schemes.
The US conducted a universal basic income pilot program in Alaska in the form of the Alaska Permanent Fund.
The Alaska Permanent Fund is an investment fund that invests capital that originates from surplus revenue obtained from Alaska's oil and gas reserves. The fund ultimately pays all dividends to every eligible citizen of Alaska.
Finland and Norway operate UBI at the level of individuals (and their families) and another at the level of society. It provides a monthly, guaranteed, and entirely unconditional cash sum to eligible citizens.
Bolsa Família of the Government of Brazil provides financial aid to poor Brazilian families. In order to be eligible, families had to ensure that children attend school with a minimum attendance and get vaccinated. Brazil has also implemented a Universal Basic Income (UBI) program in the city of Maricá with fewer conditions attached to cash transfers.
Countries a having universal basic income, source: worlpopulationreview.com
The Universal Basic Income (UBI) pilot in Madhya Pradesh was implemented from 2011 to 2012. The project was a collaboration between the Self Employed Women's Association (SEWA) and the United Nations Children's Fund (UNICEF). The project aimed to examine the impact of unconditional monthly cash transfers and provision of a basic level of income for all.
The project provided monthly cash transfers of Rs 300 to adults and Rs 150 to children to about 6,000 people in nine villages.
The experiment resulted in improved living conditions, nutritions, level of education and reduced liquor intake.
Sources:
https://peoplesdemocracy.in/2023/0806_pd/problem-%E2%80%9Cuniversal-basic-income%E2%80%9D
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PRACTICE QUESTION Q.Discuss the feasibility of implementing Universal Basic Income (UBI) highlighting its potential benefits and challenges in the context of India. (250 words) |
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