Day 23 – Q 2.Can a universal basic income scheme address the problem of poverty? Critically examine. 

2. Can a universal basic income scheme address the problem of poverty? Critically examine. 

क्या एक सार्वभौमिक बुनियादी आय योजना गरीबी की समस्या का समाधान कर सकती है? समालोचनात्मक जांच करें।

Introduction:

Universal Basic Income (UBI) is a periodic, unconditional cash transfer to every citizen in the country. Here, social or economic positions of the individual are not taken into consideration. The idea of UBI is not new but in the past few years, it has resurfaced globally in a very big way as a means of redistributing income.

Body:

UBI addresses the problem of poverty through the following:

• Efficiency: Despite making remarkable progress in poverty reduction, nearly 22 percent of the population lives below poverty line (Tendulkar committee report, 2011-12). One of the major criticisms of poverty alleviation programmes is significant leakages. UBI is seen as a more efficient alternative.
• Social Security: As a form of social security UBI will help in reducing inequality and eliminating poverty. Thus it ensures security and dignity for all individuals.
• Purchasing power: As human labour is being substituted by technology, there will be reduced wage income and reduced purchasing power. UBI will compensate for reduced purchasing power.
• Economic choice: UBI strengthens economic liberty at an individual level. This would help them to choose the kind of work they want to do, rather than forcing them to do unproductive work to meet their daily requirements.
• Productivity: UBI could promote greater productivity. For example, agriculture labourers who own small patch of land and earlier used to work in others’ farm for low wages, can now undertake farming on their own land. In long term, this will reduce the percentage of unused land and helps in increasing agriculture productivity.
• Empowerment: If promoted through gradualism – like starting with women, elderly, widows, disabled etc.

Advantages to the Government:

• Reduces wastage and errors: As every individual receive basic income, it promotes efficiency by reducing wastages in government transfers. Thus it excludes errors in identifying the intended beneficiaries – which is a common problem in targeted welfare schemes.
• Reduces bureaucratic burden: Considerable gains could be achieved in terms of bureaucratic costs and time by replacing many of the social sector schemes with UBI.
• Financial Inclusion: As Economic Survey (2016-2017) points out, transferring basic income directly into bank accounts will increase the demand for financial services. This would help banks to invest in the expansion of their service network, which is very important for financial inclusion.

Arguments against UBI:

• A guaranteed minimum income might make people lazy and it breeds dependency. They may opt out of labour market and can refuse to work (as it had been observed in case of MGNREGA).
• Given the large population size, the fiscal burden on government would be high. Also, as Economic Survey 2016-17 noted, once implemented, it may become difficult for the government to wind up a UBI in the case of failure.
• If the UBI is funded by higher taxes, especially by the indirect taxes, it may result in inflation. This, in turn, will reduce the purchasing power of the people and lowers the value of the amount transferred.
• There is no guarantee that the additional income will be spent on education, health etc. there are chances that the money will be spent on ‘temptation goods’ such as alcohol, tobacco, drugs etc.
• It will also face the problem of ‘exclusion error’ in the identification of beneficiaries. Efficiency will be reduced. Corruption will creep in.  More importantly, UBI will not remain ‘universal’.

Way forward:

• India stood at 130 out of 189 countries in the UNDP’s 2018 HDI ranking. Movement in the HDI are driven by changes in health, education and income. The schemes for these are meant for long-term improvement in human development, rural infrastructure, employment etc. and can’t be substituted by cash transfer. Thus a complementary and aiding income can be a balanced solution.
• A transparent and safe financial architecture that is accessible to all is important for the success of the UBI. In other words, the success of UBI depends on the success of efficient mode of delivery like JAM Trinity.
• Study the efficiency of similar schemes in other countries (Finland, Kenya, and Spain etc.) and work out the best implementation suitable for India.

Conclusion:

Though UBI has many advantages, there are many practical challenges too. As Economic Survey states, UBI is a powerful idea whose time even if not ripe for implementation is ripe for serious discussion.