Universal Basic Income in India
The case for a Universal Basic Income in India (UBI) was recently proposed as a tool for combating poverty by providing citizens with an income cushion - which would supposedly allow workers to have more bargaining power, enable them to take risks with their jobs and invest in education. The Ministry of Finance’s recent Economic Survey explored the possibility of the UBI in replacing its various welfare programs with a uniform stipend being paid to every adult and child regardless of their income level. Worldwide, the idea of UBI has gathered support because of the increasing inequality amongst the rich and the poor as well as the loss of jobs due to automation. Under these circumstances, the UBI is the minimum level of support that the government is willing to guarantee its citizens – but will this be generous enough to compensate for the benefits of the several smaller subsidies that will vanish with its implementation? The biggest question remains that whether under this new pretext corruption in the existing government schemes will be prevented and the impact this move will have on the poor.
The crucial point of this scheme is that you getting money for free that you either choose to spend productively or profligately. However given the talk of UBI, it would be surprising if it was used in its pure form under this government, given Prime Minister Modi’s latest #New India speech. In the speech he highlighted the direction he wanted his government to move in, as one that made available opportunities for success and not handouts to solve people’s problems.
The utility for UBI would vary person to person, situation to situation and country to country. There are several models for success. In the U.S. in the seventies, there were small-scale experiments with basic-income guarantees, and they showed that young people with a basic income were more likely to stay in school; in New Jersey, childrens’ chances of graduating from high school increased by twenty-five per cent. The Economic Survey cites a 2015 study of cash-based welfare programs in six developing countries which proved that financial aid didn’t infect discourage recipients from working. It also cites a study in Madhya Pradesh where farmers used the free money to invest more in their crops - contrary to the assumption that male members will waste this income on alcohol, tobacco and paan. While the success rate for UBI in these cases are definitely commendable, they disregard the huge scale on which India would have to implement it and the varying effects it would have on the poor.
UBI could be considered as an alternative idea to the existing welfare schemes such as MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act). The UBI would be paid directly to people’s bank accounts, through direct benefit transfer (DBT) made possible by Aadhar, making the inefficient administrative machinery redundant. As a map in the economic survey shows, many districts with the largest concentrations of poor residents receive less than a proportional share of spending under the six largest welfare programs. Subsidies on kerosene, railway, electricity and LPG reach less than 50% of the poor. Where does this money go? The middleman, the politician and the rich. In order to make UBI financially feasible (The UBI is estimated to cost them 5.1% of the Indian GDP), the government would have to scrap out the large subsidies and welfare programs. While there is a pressing need to help the poor secure their share of benefits without these subsidies, the one-and-only lump sum UBI can’t determine the will power of the poor in spending this income on food or investing it in jobs. There will be those who choose to spend it on starting their own business or their education but a fair share of those would prefer their daaru and beedi.
In words of the renowned economist Amartya Sen “When Gandhi talks about helping the poor, he is talking specifically about treating them with respect and equality, not as untouchables. Not necessarily with a basic income and not being targeted as the minority.” I agree with Sen on his objections to UBI – it’s too simplistic of a solution towards poverty. Income isn’t the best way to think about helping the poor – there are huge deficiencies in public education, healthcare and social security in India. Sen suggests that this could be implementable if India reached the same level of prosperity as in Europe but for the time being giving them cash will not compensate for their food, education, healthcare and of course the basic subsidies. Further the concept of “universality” implies that the government won’t be trying to identify the poor. Do people with cars, televisions and air conditions in their homes need a few extra rupees annually to sustain their lifestyle? The utility of each rupee spent on the UBI will have a diminishing value in these homes and for a country where poverty has been a crisis centuries long and unprecedented as compared to most regions of the world – I say that we could use every rupee in advancing the case for the poor. A better alternative to this and something to consider could be a Negative Income Tax (NIT). As Friedman proposes, the NIT would have the potential to distinguish between those who are “worthy” and “unworthy” by giving (or taxing) citizens an appropriate share of income based on how much they are earning. However, this alternative fails to address the other flaws of UBI because it could also weaken the incentive to work.
In these debates, the poor continue to exist as a huge section of Indian society that are waiting on the margins for the many promises made by every popular election campaign and every cheesy politician - Garabi Hatao (Remove Poverty) – to be fulfilled. While their time has been long overdue, as Gandhi himself says, we don’t’ want to be giving charity to able bodied men. We want to increase the productivity of our economy and the poor. Of course we want to provide the poor with benefits and of course we acknowledge the corruptions in the current system, but we should work with them in eradicating their poverty.
Anya Bharadwaj is Sophomore in the School of Foreign Service, Georgetown University. Anya is majoring in Regional and Comparative Studies. She hails from New Delhi, India.
(The views expressed by author are the author's alone and do not represent the views of India Ink.)