Day 67 – Q 5.How effective can be strategy of providing a universal basic income to the poor as a poverty alleviation measure in India? Critically evaluate while discussing its pros and cons.

5.  How effective can be strategy of providing a universal basic income to the poor as a poverty alleviation measure in India? Critically evaluate while discussing its pros and cons. 

भारत में गरीबी उन्मूलन के उपाय के रूप में गरीबों को एक सार्वभौमिक बुनियादी आय प्रदान करने की रणनीति कितनी प्रभावी हो सकती है? इसके पक्ष और विपक्षों की चर्चा करते हुए समालोचनात्मक मूल्यांकन करें।

Introduction:

Universal basic income (UBI) is an unconditional cash payment given to all citizens with the assumption that they are willing to work but unable to find one. It’s a western concept where high level of automation has resulted in high unemployment. The idea has been popularized by philosophers like Thomas Paine who argued that resource of earth is common property of all.

In Indian context, where every third person is a poor, there are huge marginal and small farmers, daily wage workers, who move in and out of poverty, the concept can be useful as a poverty alleviation measure in India. Also universality of program avoids exclusion, bureaucratic burden of identifying beneficiary and cash transfer will not be market distorting.

Body

UBI is an effectiveness poverty alleviation measure in India 

Pros

• Improving living standards – A study in Indore showed positive results, where  majority of people (more than 66 per cent) used it for constructive purposes, like agriculture and some reported a five times increase in livestock. Others tried to uplift their family status by sending children to better schools.
• Improving production – Telangana which provides unconditional income of Rs 8,000 per annum to every farmer, shows to have increased the cultivated acreage and also the production by approx. 30 per cent.
• Investment in agriculture – This can increase productive investment, increase access to markets and stimulate local economies. Income support can be used to make a repayment or at least activate a bank account which can then receive a loan.
• Choice of spending – It will provide people with the choice of spending their money, like sending their children to better schools and other such purposes.
• Acts as insurance – Regular income protects farmers during price crash or crop loss.

However, without wider reforms, the poor remain handicapped in their ability to “buy” themselves out of poverty, whether through entrepreneurship or investments in their human capital. A UBI handout could reduce the political incentive for these reforms.

The poor are already abandoning public schools in large numbers and accessing non-state providers to meet their demand for quality human capital. While a UBI would support this trend, fundamental reforms are needed to establish accountability within public schools and enable non-state actors—non-governmental organizations and private schools—to deliver quality learning outcomes.

Cons

• Motivation for work – demographic dividend is the asset of our nation. If youth loose motivation to work then innovation and urge to compete with other nation will be lost. This will hamper out growth.
• Free lunches always pose a moral hazard, where the money can be spent for unproductive purposes or make a person lazy.
• Irrigation facilities, quality inputs, market reforms and land reforms like land bank and land leasing unless undertaken, farming cannot be made remunerative.
• Resource constraint –  Approx. Rs. 8000 per year per family, as suggested by Economic  survey 2017-18, will be meagre and an adequate amount to take them out of  poverty will drain the government exchequer.
• There is a possibility that inflation might increase by the same extent by which income has been given, thus negating the effective increase in income.

Conclusion

Hence in Indian context the adoption of UBI should involve wide ranging debates and discussions. A partial basic income scheme may be introduced on experimental basis to know its practical viability. But along with it more reforms like strengthening entrepreneurship, remove barriers to job creation, and increase the returns to human capital investments by the poor, specific reforms to allow the poor to gain better education and health etc must be taken.