universal-basic-income-why-why-not

Ensure a minimum income for all (GS Paper 2: Govt. Policies and interventions for development in various sectors & issues arising out of their design and implementation; GS Paper 3: Indian economy and issues relating to planning, mobilization of resources, growth, development and employment, inclusive growth and issues arising from it):

  • The idea of a universal basic income (UBI) is gaining ground globally.
  • It has supporters among the political left and right; and proponents and opponents of the free-market economy.
  • A UBI requires the govt to pay every citizen a fixed amount of money on a regular basis and without any conditionality.
  • Compelling Conditions:
    • Millions of people remain unemployed.
    • Millions of people are extremely poor.
    • Despite rapid economic growth in the last 3 decades.
  • The Govt. unfolded a limited version of the UBI in the form of the Pradhanmantri Kisan Samman Nidhi Yojana (PM-KISAN)which promises ₹6,000 per annum to farmers who own less than 2 hectares of land.

Where will it work?

  • The UBI is neither an antidote to the vagaries of market forces.
  • Nor a substitute for basic public services, especially health and education.
  • No need to transfer money to middle- and high-income earners as well as large landowners.
  • However, UBI should be given to: landless labourers, agricultural workers and marginal farmers.

The schemes failed to benefit landless labourers, agricultural workers and marginal farmers, because:

  • These groups have not benefited from economic growth.
  • They were and still are the poorest Indians.
  • Various welfare schemes have also failed to bring them out of penury.
  • These groups have to borrow from moneylenders and adhatiyas at exorbitant interest rates ranging from 24 to 60%.
  • Benefits of subsidized fertilizers and power are enjoyed largely by big farmers.
  • In urban areas, contract workers and those in the informal sector face a similar problem. The rapid pace of automation of low-skill jobs and formalization of the retail sector mean the prospects of these groups are even bleaker.

However, According to National Sample Survey Office (NSSO) data from the 70th round:

  • Institutional credits account for less than 15% of the total borrowing by landless agricultural workers.
  • The figure for marginal and small farmers is only 30%.
  • As a result, they do not stand to benefit much from the interest rate subsidy for the agriculture sector.
  • Here, Institutional credit issued by banks and cooperative societies can help.

Way forward:

  1. An income support of say, ₹15,000 per annum – an amount worth more than 1/3rd of the average consumption of the poorest 25% households, and more than 1/4th of the annual income of marginal farmers can be a good supplement to their livelihoods.
    1. It can reduce the incidence of indebtedness among marginal farmers.
    2. It will help them escape moneylenders and adhatiyas.
    3. It can help the poor to make ends meet.
    4. Studies say that even a small income supplement can improve nutrient intake.
    5. It can increase enrolment and school attendance for students coming from poor households.
    6. It will lead to improved health & educational outcomes, which would lead to a more productive workforce.
  2. It seems to be a good idea to transfer the money into the bank accounts of women of the beneficiary households.
    1. Women tend to spend more of their income on health and the education of children.
    2. Moot point
  3. In principle, cash transfers can result in withdrawal of beneficiaries from the labour force.
  4. However, the income support suggested above is not too large to discourage beneficiaries from seeking work. In fact, it can promote employment and economic activities.
  5. For instance, income receipts can come in handy as interest-free working capital for several beneficiaries (fruit and vegetable vendors and small artisans), thereby promoting their business and employment in the process.
  6. Income transfer scheme – Points in favour:
  7. It will help bring a large number of households out of the poverty trap or prevent them from falling into it in the event of exigencies such as illness.
  8. It will reduce income inequalities.
  9. Since the poor spend most of their income, a boost in their income will increase demand and promote economic activities in rural areas.
  10. Nonetheless, an income transfer scheme cannot be a substitute for universal basic services.
  11. The direct income transfers should not be at the expense of public services for primary health and education.
  12. Budgetary allocation for these services should be raised significantly.
  13. Programmes such as the MGNREGA Scheme should also stay.
  14. With direct income support, the demand for the Programmes will come down naturally.
  15. There is limited fiscal space for direct income support. It will have to be restricted to the poorest of poor households.
  16. The Socio-Economic and Caste Census (SECC) 2011 can be used to identify the neediest.
    1. Groups suffering from destitute, the shelter-less, manual scavengers, tribal groups, and former bonded labourersare automatically included.
    2. The dataset includes more than 6 crore landless labourers.
    3. It includes small farmers who face deprivation criteria such as families without any bread-earning adult member, and those without a pucca house.
    4. The other needy group, small farmers, missing from the SECC can be identified using the dataset from the Agriculture Census of 2015-16.
    5. Together, these two datasets can help identify the poorest Indians, especially in rural India.
    6. However, many households such as marginal farmers belong to both datasets. The Aadhaar identity can be used to rule out duplications and update the list of eligible households.
  17. As an approximation, the number of eligible households is 10 crore. The scheme will require approximately ₹1.5 lakh crore per annum. The PM-KISAN Yojana can be aligned to meet a part of the cost.
  18. Moreover, the tax kitty can be expanded by reintroducing wealth tax.
  19. Centre and the States should together bear the cost. States such as Telangana and Odisha are already providing direct income support to their farmers. These States can extend their schemes to include the ‘non-farmer poor’. The other States too should join in.