Universal Basic Income : A peep into dream world

An exceedingly important proposal in the Economic Survey to introduce a new scheme to guarantee Universal Basic Income (UBI) to every citizen seems to have a favourable climate for experimentation in India. Known by various names, it was discussed in many countries all over the world but mostly dropped as impracticable.

Importantly, the Economic Survey has devoted a whole chapter of 40 pages to this subject. Union Finance Minister Arun Jaitley calls it a “powerful idea” and the Government finds it feasible. It is intended as a substitute to a number of existing welfare schemes and subsidies and not addition.

Governments both at the Centre and States are fast developing as administrators of subsidies which now constitute the principal poverty alleviation and minimum livelihood guarantee instrument.

The Survey reports of gross mismatch existing between financial allocations and actual needs across districts due to varying capacities of States, and suggest that the poor should be directly helped with guaranteed basic income.

The UBI draws inspiration from Mahatma Gandhi’s ideal of fighting poverty and worshipping labour simultaneously. “No labour, no meal” – the ideal of Gandhiji has been quoted to end the regime of subsidies. Misplaced charity, in Gandhiji’s thinking, adds nothing to the wealth of the country, whether material or spiritual, and gives a false sense of meritoriousness of the donor”. Instead, he suggested healthy food in clean surrounding in return for work.

The Economic Survey quotes Gandhiji to bring home the point that subsidies only encourage laziness. Yet, the UBI is based on three principles – universality, unconditionality and agency. It means unconditional transfer of income to every citizen without discrimination and without any condition whatsoever including work in return.

The recipient is an individual and not a family or household and the receiver is not expected to do some service to earn it. The apparent contradiction between Gandhiji’s emphasis on work and government’s emphasis on basic income is a bit baffling, but the moot point is the context of growing subsidies in which the proposal has come.

What has prompted the government to think of such a huge scheme is the big question. Is it advisable to cover the rich and mighty, who control many resources for whom the UBI may not be enough to cover even a day’s expenses? Is it workable in a vast country with a population of 1.3 billion? Will the state governments and regional parties be willing to give up a sure way of establishing their popularity with the masses that now exists in the regime of subsidies? Will it not increase unemployment by closing thousands of agencies now engaged in administering various welfare schemes? What if it fails and we revert to subsidies thus proving “Tughlakian” mindset? Sure, the government cannot be unaware of these and many more questions on the scheme and almost insuperable problems in implementation. However, the time is ripe for a thorough discussion of this subject, which is being discussed in many countries including the affluent.

It has been estimated the UBI that reduces poverty to 0.5 per cent of the GDP (assuming that top 25 per cent income bracket do not participate) would cost between four and five per cent of the GDP. Presently, the estimated cost of middle class subsidies and food, petroleum and fertilizer subsidies is about 3 per cent of the GDP. The difference not being substantial, there is reason to consider the idea.

The UBI, it is said, “liberates citizens from paternalistic and clientelistic relationships with the State” under the system of subsidies, and empowers women by taking the individual as the unit and not the household. Leakages, corruption, and misallocation possible in targeted welfare schemes can be eliminated in universal system.

UBI is known by various names in different countries. The common feature is its universality, regularity, and unconditionality. What sounds like a communist ideology, is also an idea prevalent in capitalist countries and practised in different forms like graded tax system, social security, and subsidies.

Discussions on basic income started in the developed countries of the US and Canada in the 1960s and in Europe in the 1970s. Gradually, it spread to Latin America, Middle East, and some countries of Africa and Asia. Opinion polls indicate majority support for the idea in Europe.

In the US, in 1969, President Richard Nixon proposed a scheme of “Family Assistance Programme” to guarantee a certain minimum income to every family. The Alaska Permanent Fund is said to be a partial basic income scheme started in 1982. Universal Basic Income is advocated by the Green Party in the US in 2010 to every adult regardless of health, employment or marital status “in order to minimise government bureaucracy and intrusiveness into people’s lives”.

Brazil adopted the Natural and Universal Basic Income Law in 2004 and started its implementation with the most needy. Switzerland conducted a referendum on this subject, but decisively rejected the idea by 77 per cent of votes.

In India, a pilot scheme was conducted in eight villages in Madhya Pradesh in 2011 starting with payment of Rs 200 per month to every adult and Rs 100 to every child and increasing it to Rs 300 and Rs 150 respectively. It was reported to be a successful experiment giving many positive results like improvement in nutrition, school attendance, small-scale enterprises, and reduction in debt burden of the poor.

For successful functioning of the UBI system, bank account, Aadhaar card for identification and mobile connectivity are required for every person. The Union and State governments have to agree on the pattern of sharing the cost – a requisite difficult to fulfil in view of the popularity of subsidies and freebies.

The UBI scheme, while guaranteeing minimum income cannot stall unmanageable unemployment that will result from closure of offices administering welfare schemes like PDS or MGNREGA. Above all, the poor have to learn to take the system as an aid to improve their standard of living and not as a pension for idle life. Who will teach them?

By Dr S Saraswathi