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Universal Basic Income: A Weapon for the People

The World Wide Debate:

Universal basic income is being debated over not only in the develop countries but also in the developing countries despite the differences in the economic backgrounds and scenarios. In the developed nations, difficulties like unemployment caused due to automation and globalization, unequal distribution in the economy due to policies, stagnant wages and declining demand gave rise to a need for universal basic income.

Whereas, in the developing nations like India, poverty and inefficiency of the social welfare schemes to alleviate poverty due to leakages in the delivery system, misidentification of beneficiaries, untimely or inadequate aid to the beneficiaries and the most common issue of exclusion have led to arguments in favour of universal basic income. Thus, in 2016 an opinion poll was conducted by European Union where 65% voted in favour of universal basic income.[1]

The ultimate goal of the social welfare schemes & subsidies and universal basic income is the same, that is, to enable the beneficiaries to meet their requirements. Thereby, it can be stated that the schemes are an indirect way of helping the needy whereas universal basic income is a direct method of helping the beneficiaries.

Propositions of the Eminent Economists:

Direct cash transfers had been proposed in the Economic Survey of 2009-10 by Mr. Kaushik Basu, the Chief Economic Advisor on the grounds that it would bypass the corrupt bureaucracy and the government would not have to invest in identifying the beneficiaries thereby saving resources.[2]

Mr. Arvind Subramaniam, the current Chief Economic Advisor to the Government of India is of the strong belief that universal basic income should replace the welfare schemes. According to him, universal basic income would benefit the people much more than the 950 schemes of the Central Government in addition to the schemes of the State Governments. For universal basic income to benefit the beneficiaries and to enable direct cash transfers, he has emphasized on a successful implementation of Jan Dhan Yojana, AADHAR and mobile system.

The Shanta Kumar Committee[3] also recommended cash transfers initially in the larger cities as a substitute to the food procurement and distribution system.

Development Economist, Mr. Debraj Ray has also mooted universal basic income as in his opinion, all individuals would be guaranteed a share in the GDP of the nation stating that it would be a lesser burden for the government in circumstances when the economy slows down or when the revenue from tax is low.

Mr. Pranab Bardhan, an Indian Economist is in the favour of universal basic income. Apart from its anti-poverty potential, universal basic income can also be a substantial measure to improve autonomy, for instance of adult women, three-quarters of whom do not earn income and dignity by giving workers an escape ladder from socially despised occupations such as scavenging, waste-carrying, prostitution, etc.

He further stated that about one-third of workers in the organised sector are contract labourers who are deprived of most benefits. Trade Unions have been demanding benefits for them and their struggle will be strengthened if it now becomes part of a much larger movement for universal basic income.[4]

Mr. Amitabh Kant, the Chief Executive Officer of NITI Aayog, stated that any payout should be given only as a loan for ‘productive purposes’ and the loans should be interest free and this should be tried by the government for a period of three to four years which can be repaid and recycled.

Mr. Arvind Panagariya, the former Vice-Chairman of the NITI Aayog, said that he was in favour of targeted transfers, where those living in poverty receive the benefits, i.e., a quasi-universal basic income.

Mr. Arun Jaitley, former Finance Minister of India, is supportive of the concept of universal basic income but expresses that it is not feasible in India at present given the limitations prevailing here.

Mr. Maitreesh Ghatak, a professor of Economics at the London School of Economics, has questioned the feasibility of implementation of universal basic income in India on the grounds that only a small fraction of the population of India pays income tax. Here, only 2.3% of the population files income tax returns, whereas only 1% of the population pays taxes, rendering the fiscal instruments to reclaim the transfer from the rich are severely limited.

Therefore, he suggests that universal basic scheme should be funded through indirect taxes. He further stated that universal basic income cannot be a substitute for provision of goods and services as it provides relief from the deprivation relating to the availability of goods and services from the marketplace.[5] As per the Economic Survey of 2016-17, there are only seven tax payers for every hundred voters in the country.[6]

Mr. Vijay Joshi, an Economist has discussed the concept of universal basic income in detail in his book, India’s Long Road: The Search for Prosperity.

Quantifying Universal Basic Income:

With reference to the estimates of International Monetary Fund (IMF), India can afford Rupees Two Thousand Six Hundred per annum as universal basic income if it replaces the prevailing food and fuel subsidies. This would constitute 3% of the Gross Domestic Product (GDP).

However, looking at the estimates of expenditure of the Government of India for the financial year 2016-17 on the social welfare schemes is Rupees Three Lakh Sixty Two Thousand and Fifty Two Crore (Rs. 362052 Crore) which is around 2.4% of the national GDP. The total population as per the 2011 Census is around 121 Crore.

Thus, basic income would be aimed to benefit only the population below the poverty line then the per capita entitlement would amount to Rupees Twelve Thousand Six Hundred and Sixty Nine per person per annum. Having considered the universality of the scheme, if it is applicable to the entire population, it would lead to an inclusion of 60%.

Thus, if the benefit is extended to at least 75% of the population, making it quasi-universal in nature, the entitlement would drop to a mere Rupees Four Thousand per person per annum. Even then, this would constitute 10.8% of the GDP.[7] In order to make basic income successful, it is utmost important that the non-needy beneficiaries are either excluded while implementation through tactic or there is voluntary exclusion.

It is pertinent to note that the Economic Survey of 2016-17 does not give details of half of the schemes considered therein to calculate the expenditure on the subsidies and social welfare schemes. Further, the survey is based on the assumption that the expenditure for the year on social welfare and infrastructural schemes is 5% of the GDP.

Madhya Pradesh Unconditional Cash Transfers Project[8]:

United Nations Children’s Fund (UNICEF) and Self Employed Women’s Association (SEWA) have partnered to pilot an unconditional cash transfer experiment in the rural areas of Madhya Pradesh. Eight villages were chosen for the said purpose where people would receive basic income directly into their bank accounts, whereas, twelve similar villages would not receive the basic income. Through two pilot schemes, i.e. general and tribal around fifteen thousand people received an unconditional benefit of cash transfers.

Within four months of the implementation of the general pilot scheme, 95.6% individuals had bank accounts while for the rest of the 4% bank accounts were opened within the next three months, thereby leading to a total of 5547 bank accounts across eight villages. For the first twelve months, an adult received Rupees Two Hundred and a child received Rupees Hundred. Thereafter, for the next five months, the amounts were raised to Rupees Three Hundred and Rupees One Hundred and Fifty respectively.

As per the 2011 Census of India[9], tribal group constitutes 21% of the population of Madhya Pradesh. Therefore, under the tribal scheme, no bank accounts were opened and the individuals were directly given cash. For the entire period of implementation of basic income, the adult individuals received Rupees Three Hundred and the children received Rupees One Hundred and Fifty.

UNICEF and SEWA studied more than hundred cases in depth to find out whether providing basic income influenced the outcome. Further, through community level surveys, interviews with key respondents, tracking the weights of children for age as an alternative to the nutrition levels, their attendance and performance in schools they concluded that basic income was a positive experiment.

Thus, it was found that the basic living conditions, starting with the most essential matter i.e. sanitation, better access to clean drinking water, improvements in cooking and lighting energy sources, improved significantly. There was a major increase in food sufficiency, improved diets, better nutrition and reduction in seasonal illnesses. As there was an improvement in health of children, it led to higher school attendance and improved performance.

The basic income was also spent on school uniforms, books and stationery. The cash transfer facilitated small scale investments such as buying better raw materials and equipment, which resulted in higher income. Through the tribal pilot scheme, wage labour and bonded labour were able to invest in own farms and other forms of self-employment. Women empowerment was another significant outcome of these pilot studies, as it improved their participative power in the economic decision making in the household.

Provision of basic income resulted in reduction in debts, as it enabled the villagers to both borrow less from the money lenders at a high interest rate and pay back to the money lenders with the basic income. However, there was no evidence that this cash transfer had led to a rise in alcohol consumption, contrary to popular belief.[10]

However, the noteworthy point here is that the basic income was provided to these individuals in addition to the social welfare schemes provided by the State and the Central government. Around 321 government schemes were prevailing in these twenty pilot villages and through the survey it was found out that the basic income aided people in availing the benefits under the schemes.[11] Therefore, it is evident that universal basic income cannot be an alternative to the social welfare schemes but a combination of the two can bring a massive change in peoples’ lives.

Universal Basic Income Not as a Substitute of Welfare Schemes:

Although the aim of both welfare schemes and universal basic income is to increase the income of the beneficiary households, the welfare schemes provide various other benefits.

The Integrated Child Development Services (ICDS) programme, there is a component[12] under which supplementary food is given to children below five and ration is provided to expectant and nursing mothers. ICDS, beside the Supplementary Nutrition Programme, has many more components like monitoring the growth of the children, pre-school education, improving nutrition and health education to women etc. If ICDS is replaced by a universal basic income scheme, then the benefits of these components of ICDS will be lost. [13]

Similarly, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provides employment and thereby improves the income of wage-seekers.[14] Even simple works like de-silting of tanks and application of the same to the fields have double the benefit. It increases the capacity of the water bodies and improves the fertility of the soil, which in turn, is bound to increase the income of the beneficiary household.

Works such as clearing and levelling of land and digging trenches are bound to increase the productivity of land and thereby income of the farmers. In the recent past, wage seekers under the MGNREGA scheme have been used to create community assets like panchayat buildings, roads etc. For the construction of Individual Household Latrine, the wage component is being met from the MGNREGA fund. If the employment scheme is replaced by universal basic income, then we have to forgo all these benefits.[15]

Further, the subsidies are aimed at a particular class of people with a definitive objective whereas the basic income is universal in nature. It is not very equitable that the poor and the rich will receive the same transfer. As it is universal in nature, it will increase the deficit. Only likes should be treated alike. In case of cash transfers, the government cannot be certain that the beneficiaries will buy the goods which they want them to buy.

Another hurdle is that the market for the commodities might not exist throughout the length and breadth of the country. Many propose that a minimum guaranteed income might make people lazy and affect the labour market. Further, in the circumstances prevailing in India, where there is high gender disparity, there is a high possibility that men would exercise control over the spending of the basic income which is not the case with in-kind transfers made through the welfare schemes.

With constant fluctuations in the market, the purchasing power can be curtailed which is not the case with subsidies. On the contrary, it could also lead to inflation leading to a greater trade deficit. Universal basic income scheme will only be successful if it properly reaches out to women and the vulnerable groups.

End-Notes:
  1. Cemal Karakas, European Parliament, Basic income: Arguments, evidence, prospects, MEMBER’S RESEARCH SERVICE, (Sept. 2016), PE 586.679,
    http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/586679/EPRS_BRI(2016)586679_EN.pdf
  2. Tadit Kundu, Will a universal basic income work in India?, LIVEMINT, (Jan. 9, 2017), http://www.livemint.com/Politics/jUFCF5HIrdVr1iqOsbXn6O/Will-a-universal-basic-income-work-in-India.html
  3. Government of India, Ministry of Consumer Affairs, Food & Public Distribution, Recommendations of High Level Committee on restructuring of FCI, PRESS INFORMATION BUREAU, (Jan. 22, 2015), http://pib.nic.in/newsite/PrintRelease.aspx?relid=114860
  4. Pranab Bardhan, How India can do UBI: Universal Basic Income is a practical solution to poverty and inequality, TIMES OF INDIA, (May 3, 2017),
  5. https://blogs.timesofindia.indiatimes.com/toi-edit-page/how-india-can-do-ubi-universal-basic-income-is-a-practical-solution-to-poverty-and-inequality/
  6. Maitreesh Ghatak, In Developing Countries, A Strong Case For Universal Basic Income To Combat Poverty, THE WIRE, (July 21, 2017), https://thewire.in/159761/universal-basic-income-developing-countries-poverty/
  7. Government of India, Ministry of Finance, Department of Economic Finance, Universal Basic Income: A Conversation With and Within Mahatma, ECONOMIC SURVEY 2016-17, (Jan. 2017), http://www.indiabudget.gov.in/es2016-17/echapter.pdf
  8. Ibid, Chapter 9
  9. UNICEF & SEWA, A little more, how much it is: Piloting basic income transfers in Madhya Pradesh, India, SEWA BHARAT, NEW DELHI, SUPPORTED BY UNICEF, INDIA OFFICE, (Jan. 2014), http://unicef.in/Uploads/Publications/Resources/pub_doc83.pdf
  10. Census of India 2011, Scheduled Tribe Population – Census 2011, GOI, http://www.census2011.co.in/scheduled-tribes.php
  11. Standing, G., India’s experiment in basic income grants, GLOBAL DIALOGUE, 3(5), 24-26.
  12. UNICEF & SEWA, Table 3: General Pilot: Households eligible for and obtaining specified schemes, and whether basic income helped, supra 1, 18-19.
  13. Government of India, Ministry of Women and Child Development, Supplementary Nutrition Programme, PRESS INFORMATION BUREAU, (Feb. 21, 2014), http://pib.nic.in/newsite/PrintRelease.aspx?relid=104046
  14. A. Mahendran & S. Indrakant, Why Universal Basic Income Is Not A Perfect Substitute For Existing Subsidy Schemes, THE WIRE, (Oct. 23, 2017), https://thewire.in/189870/universal-basic-income-india/
  15. Mahatma Gandhi National Rural Employment Guarantee Act , 2005, http://www.nrega.nic.in/netnrega/home.aspx
  16. A. Mahendran & S. Indrakant , Supra 13
Written By:
  1. Madhavi Lakhotia and
  2. Mr. Samar Rege

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