Has the time arrived for a genuine Universal Basic Income scheme for deserving Indians? We investigate.
How India can do Universal Basic Income (UBI)
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- The minimal safety net : The idea of a Universal Basic Income (UBI) where the state pays every deserving citizen a uniform amount as part of welfare – is attracting a lot of political discourse worldwide. The Economic Survey of India 2016-17 made the case for and against the concept of a Universal Basic Income. Although the Union Budget did not announce any such programme, the suggestion merits discussion.
- Kela of Finland : Finland became the first large economy to contemplate it. Kela, Finland’s social security agency – Kansaneläkelaitos, started a pilot programme that would provide 2,000 citizens a basic income of 560 euros every month. This income is in lieu of all other social schemes. These selected people would retain this income even if they were to find a job! Download all Kela statistics from Bodhi Resources page here.
- Freedom from indignity : In India, it can also be a substantial measure to improve autonomy and dignity by giving workers an escape ladder from socially despised occupations (scavenging, waste-carrying, prostitution, etc).
- Deep Dive : Read more on poverty, hunger, destitution etc. here.
- Now, the opposition : Some fiscal bureaucrats say that it will be an add-on to the fiscal burden since the vested interests are too strong. Social activists say that talking of UBI is a ploy to politically undermine some of the existing welfare programmes which are doing well. Do dive deep into this, you may check content on UBI available on our portal, here, and on government schemes here.
- NIPFP speaks up : The most recent estimates made at the National Institute of Public Finance and Policy suggest that subsidies (central plus state) that go to better-off people (non-merit subsidies) amount to about 5% of GDP. Also the central budget alone shows ‘revenue foregone’ coming to about 6% of GDP. If one-third of this revenue foregone is made available for this purpose, added to non-merit subsidies, it comes to 7% of GDP. This is not a small sum. It is more than twice the total amount currently spent on all anti-poverty programmes.
- Tax to GDP ratio : The tax-GDP ratio in India is substantially lower than in China, Brazil and some other developing countries. Our real estate and property tax assessments are substantially low. We have zero taxation of agricultural income, long-term capital gains in equity markets and of wealth and inheritance. Read all about this tax to GDP on our portal here.
- Gini Coefficient : From the NSS household survey data which underestimate the wealth of the rich, the standard Gini coefficient measure of asset inequality rose from 0.66% in 1991-92 to 0.75% in 1011-12. If India can divert some of the subsidies and revenue foregone from their current better-off recipients and introduce significant fresh taxation of the rich, UBI of about Rs.1000 per person per month si fiscally affordable.
- Kill some, Rejuvenate some : Some resources can come from ending wasteful welfare programmes (though not programmes like ICDS, mid-day meals and MGNREGA). To start with, UBI could be first introduced only for women as a basic right to minimum economic security.
- Redistribution through subsidies is so out of favour : For a fairly long time in India, the default redistribution option has been job reservation and subsidization of private goods (food, fertilizers, fuel etc). We need to focus on public goods and welfare services that are universal. Patronage distribution to particular groups should be done away with.
- Do check out exams-focussed Confidence and Vocabulary Booster series of learning resources, here!
- Download Resources : PDFs on world politics available on Bodhi Resources page here. And, here are some facts and images to help the case better.
The Finns have it, the Finns have it
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