A Financial Grant: Universal Basic Income
The Economic Advisory Council to the Prime Minister (EAC-PM) recommended the government to introduce a demand-based guaranteed employment scheme for the urban unemployed on the lines of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). It also suggested a Universal Basic Income (UBI) and the allocation of higher funds to the social sector to reduce inequality in the country. The Council noted that while wages have been growing, these are concentrated, marginalizing the poor. As said by EAC-PM Chairman Bibek Debroy in a report released on May 19, 2022.
Universal Basic Income (UBI) is a socio-political financial transfer policy proposal in which all citizens of a given country receive a legally stipulated and equally set financial grant paid by the government. A Basic Income can be implemented nationally, regionally or locally.
Universal Basic Income has mainly four components:
1. Universality: It is universal in nature.
2. Periodic: Payments at regular intervals (not one-off grants).
3. Individuality: Payments to individuals.
4. Unconditionality: No pre-conditions applied with the cash transfer.
India has depended on subsidies and transfer payments to help those at the bottom of society. Various programs sponsored by the Central government account for a large chunk of budgetary allocation. A large number of these programs are fragmented and plagued by administrative leakages. Taxpayer’s money often ends up lining the pockets of middlemen. Additionally, subsidizing the essential consumer goods, including food and fuel, compels the poor to consume those goods, regardless of quality costs. Replacing these subsidies with cash transfer would ensure, at least, that the recipients are getting the intended monetary benefit as well as freedom of choice.
Consequences of UBI in India:
1. Higher Government Expenditure: If UBI is universal, which means all citizens, regardless of their financial capacity, are by default beneficiaries will widen their existing rich-poor gaps in India. Adopting a universal approach in India would result in higher government expenditure as it will have to ensure that no citizens are excluded.
2. Conspicuous Spending: UBI is not tied to the recipient's behaviour, and they are free to spend the money as they wish. Households with lack of awareness about fiscal management may spend on wasteful activities.
3. Reduction in Labour Force: A minimum guaranteed income might make people lazy and opt out of the labour market. In the absence of any reciprocal exchange, UBI in India may easily turn into a scheme that renders the working age adults as supplicants and without any real purpose or direction in their lives.
4. Increase the Rate of Inflation: Replacing things like food programmes with UBI might expose the population to more market risks and inflation.
5. Federal Issue: Centre - State negotiations on cost sharing for the programme could delay its implementation.
Therefore, it would be more prudent to take the middle road. The government should retain existing in - kind programs that deliver necessities and enhance one’s quality of life, such as food security, healthcare, sanitation and education. UBI envisages an uncompromised social safety net that seeks to assure a dignified life for everyone, a concept that is expected to gain traction in a global economy buffeted by globalization, technological change and automation.
There is a great saying, “If you give a man a fish, you feed him for a day, if you teach a man to fish, you feed him for a lifetime.” Effective education system will produce skilled youth and eliminate the need for UBI.