A universal basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement.

 

According to the Basic Income Earth Network, a Universal Basic Income (UBI) is a “form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money”. It is based on the principles of universality and unconditionality.

 

Arguments in favour of UBI:

 

  • Promote social justice – reduce inequality through income redistribution.
  • Thrust to financial inclusion – as more people will use banking facilities to access monthly UBI deposits.
  • Better targeting – plug leakages and avoid exclusion / inclusion errors for beneficiaries.
  • Administrative efficiency – cutting through multiple layers of bureaucracy thus reducing red tape and corruption.
  • Freedom of choice – for beneficiaries to spend. It treats people as active agents.
  • Insurance – act as a safety net for shock expenditures such as health related.

 

Arguments against UBI:

 

  • Fiscal burden on limited government resources.
  • Vulnerable to political opportunism and vote-bank tactics.
  • May create artificial inflation and demand shortages.
  • Men may incur wasteful expenditures on abuses such as alcohol.
  • The assurance of a basic income may make the labour force lazy and inefficient.

 

Suggestion:

 

  • India needs rationalization of subsidies, better targeting and operational efficiency.
  • UBI is a good idea in principle, but its cost of implementation (~5% of GDP) for a large country like India makes its economy unviable. The amount could be better spent to enhance India’s health and education system, invest in infrastructure to create formal employment. Doing so would create more sustainable and long term benefits.
  • UBI can be first experimented as a pilot project on a select section of the society such as BPL households.
  • It needs to move to cash transfers at an accelerated pace with the use of Jan-Dhan, Aadhaar and mobile.
  • This will help reduce costs and spare resources for capital spending to augment growth.
  • As history has shown, the best way to pull people out of poverty is sustained higher growth.

 

Although it is the prerogative of the government to wipe “every tear from every eye”, however the idea of UBI goes against the Gandhian principle of “lending hands to someone is better than giving a dole”. Instead the government should rationalize subsidies, plug leakages and de-duplication using the JAM framework.

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