Universal Basic Income

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Practice Question: In the recent times, the arguments for/against the implementation of the Universal Basic Income has been gaining ground. What are the challenges that a developing country faces in this regard vis-a-vis a developed country? Suggest measures to overcome these challenges. – 250 words. 

History of Universal Basic Income (UIB) in India:

The first serious attempt to figure out how to guarantee a minimum standard of living for every Indian was made way back in 1962. A group of economists at the Planning Commission, led by Pitambar Pant, wrote about how every citizen could be guaranteed a minimum standard of living by 1977, or 15 years later. The Planning Commission economists said that India needed to grow its economy more rapidly if living standards had to be raised. India was too poor a country to depend primarily on redistribution. They said that families in the top eight income deciles would benefit from accelerating growth, while those in the bottom two deciles would need some form of direct income support to maintain a minimum standard of living. So, the idea of an income transfer was basically meant for the poorest fifth of the population, which was not in a position to take advantage of the opportunities that would become available from economic expansion.

Developing countries vs. Developed countries

The growing support for a basic income in developed countries comes against the backdrop of stagnant median incomes over several decades. There is also the fear that the fourth industrial revolution will displace millions of workers. The current Indian context is quite different. Incomes have been rising across the spectrum even after taking into account higher levels of inequality. It is one thing to argue for immediate help to address the distress in rural India and quite another thing to push for a guaranteed entitlement that gets locked in. The more important task over the long term is to create fiscal space to boost spending on rural public goods, as well as basic services such as health and education.

In developed countries, the UBI is supposed to supplement existing social security provisions and a top-up over and above universal provision of health, education and so on. In the Indian context, most arguments in favour of UBI are premised on the inefficiencies of existing social security interventions and seek to replace some of these with direct cash transfers.

Lack of updated data

Data on Indian poverty needs to be updated. The last official data comes from the NSSO Consumer Expenditure Survey for 2011-12. The latest survey for 2017-18 is done, but it will take some time for the numbers to be made public. It is quite likely that the new survey could show a further decline in poverty as defined by the Suresh Tendulkar committee. There may thus be a need to reassess what constitutes the minimum consumption basket used to define poverty in India. Much of the subsequent basic income calculations will have to be rejigged. Moreover, specifying who should be considered poor or how the programme will be funded remains a challenge to be solved.

Way ahead

As the Planning Commission economists pointed out in 1962, there can be no frontal attack on mass poverty without accelerating economic growth. This is how China did it. The approach should be to let economic growth work for the top eight deciles, while the focus of government welfare spending should be on the bottom two deciles that are denied opportunities for various social or geographical reasons.

UBI – an international outlook

Although the idea of UBI has been in discussion for decades, no country has implemented it. While a proposal for UBI was rejected by a three-fourth majority in Switzerland, Finland which started a pilot has now discontinued it. But even in Finland, the pilot was not a strict UBI but a social protection scheme aimed at only the unemployed. While there have been some pilots by NGOs in developing countries in Asia and Africa, they have varied in content of transfer and coverage with only few being fully universal and only the Namibia pilot experiment provided income transfer to people in the poverty line.

The real issue

The real issue with the approach of a targeted cash transfer scheme is that it envisions the role of the state to only providing cash income to the poor. This kind of approach seeks to absolve the state of its responsibility in providing basic services such as health, education, nutrition and livelihood. But it is also iniquitous since it seeks to create demand for services without supplying the services, leaving the poor to depend on private service providers. There is now sufficient evidence which shows that privatisation of basic services such as health and education leads to large scale exclusion of the poor and marginalised. In any case, India is among the countries with lowest expenditure to GDP ratio as far as expenditure on health, education and so on are concerned.

The best antidote to poverty is enabling citizens to earn their living by providing jobs.

Sources: Livemint and The Hindu

Also read: https://pointias443387146.wordpress.com/2019/02/26/inequality-and-basic-income/

Featured Image Source: World Economic Forum