Universal Basic Income

Posted by The Open Page | 10th April 2017

Today in the Economy Survey document government announced their intention to initiate universal Basic Income (UBI) distribution to those who are below the poverty line. It is estimated that about 25% of the households in India are below poverty line, the line identified as per Tendulkar report. It is also estimated that about Rs 1000 per month shall be given to the beneficiaries when the scheme will be rolled out. This benefit shall not be extended to 25% of the people who are on top of the income bracket. However, it envisages stopping of all other subsidies provided to him directly or indirectly except PDS and fertiliser. 
The present subsidies to middle class cost about 3.0 % of GDP to the state as on date. Total subsidies cost the state about 5.2% of GDP. Against this, UBI shall cost about 4 to 5% of GDP. This distribution is expected to reduce the poverty level by 0.5%. This is more required because subsidies distribution was found the weakest in districts where it was required most due to its weaknesses in distribution.
         The concept of Universal Basic Income is not new to either India or internationally. Mahatma Gandhi had once spoken about it as one of the method to provide social justice. Therefore it is said that dream of Mahatma Gandhi is fulfilled by Modi. The concept was also tried out in 2011 in selected districts. Two experiments in India were undertaken in 2011. These were funded by UNICEF and coordinated by the Self Employed Women’s association. In the first pilot project eight villages were chosen in the state of Madhya Pradesh. Here each adult was paid Rs 200 and child Rs 100 per month. This was then increased to Rs 300 and 150 respectively. Second pilot was undertaken in a tribal village and behaviour of this village was compared with that village where such cash doll out was not given. 
         As reported after the experiment, villagers who received the money did not show any sign of increase in leisure and reduce work. This transfer in contrast helped them in self employment and self farming and not working as wage laborers. Therefore, it is said that such transfer shall increase their bargaining power and therefore increase their wages and reduce exploitation. The experiment also showed that they used the money for better investment like on better seeds, equipment repairs etc and thus improving their long term productivity.
       However, these experiments could not be universalised due to non availability of infrastructure in India. At this time, the required infrastructure is said to be in place. The transfer shall be undertaken through JAM; i.e. Jan Dhan Account using Aadhar verification and mobile. 
        As mentioned earlier, this is not a new concept but it is tried in many countries and also debated and rejected by some countries. These countries include USA (With negative income tax in 1960 to 1970, and in North Carolina), Canada (Manitoba in 1970 and Ontario in 2016), Netherland (2015), Brazil (2008), Namibia (2008) and so on. Recently Sweden rejected the scheme through nation wide poll.
        UBI though is not likely to be rolled out in this budget, but it has paved its way for the future implementation. Many argue that this may be a winner for NDA in their poll campaign of 2019 in the same way as farmer loans waver offered by UPA in 2009. I am sure this concept shall also be used by NDA in coming polls in five states.

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