Universal Basic Income
18th Jun, 2020
India is considering Universal Basic Income, the National Human Rights Commission (NHRC) has told the United Nations. In this regard, NHRC, submitted a mid-term report ‘Universal Periodic Review (UPR)-III’ to the United Nations.
- The idea of a universal basic income has gained currency in the West because of the threat of automation-induced job losses.
- In India, the idea first gained currency as a solution to chronic poverty and government’s failure to effectively target subsidies towards the poor.
- Amid persistent farm distress and weak wage growth across occupations, the idea of an income support scheme seems to be gaining ground once again.
- Some advocate an income support scheme for farmers while others advocate a broader income support for all.
- Still others favour an income support scheme targeted towards the poor, that is, a non-universal basic income.
What is Universal Basic Income?
- Universal basic income refers to regular cash payments made to a given population with minimal or no requirements for receiving the money, in order to increase people’s income, according to the International Monetary Fund.
- Simply put, Universal basic income (UBI) refers to periodic cash transfers to every citizen.
- Countries across the world, including Kenya, Brazil, Finland, and Switzerland, have bought into this concept and have begun controlled UBI pilots to supplement their population.
- Though the idea of Universal Basic Income is nothing new. In the past few years, it has resurfaced globally as a means of redistributing income.
- Several experiments/pilots are being currently run across the world, but not yet adopted by any country as such.
- The primary reasons for the tilt towards UBI are two:
- Growing and vast inequality
- Threat of automation affecting jobs and creating joblessness
- Some experts think the existing system "would falter and fail if confronted with vast inequality and tidal waves of joblessness." (Annie Lawrey, author of "Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World")
Basic premise of Economic Survey (ES) of 2016-17's UBI:
- "A just society needs to guarantee to each individual a minimum income which they can count on, and which provides the necessary material foundation for a life with access to basic goods and a life of dignity."
- Three components of this UBI model are:
- Agency (by providing support in the form of cash transfers to respect, not dictate, recipients' choices)
- Its key features:
- Poverty line: Poverty line for 2016-17 has been fixed at Rs 7,620 per year, using Tendulkar's poverty line formula (inflation indexing @ Rs 5,400 per year fixed for 2011-12 to 2016-17 with a target poverty level of 0.45%) to lift all poor above the Tendulkar poverty line.
- Target: It takes 75% of population as universal for UBI purpose.
- Cost and fiscal space: ES model will cost 4.9% of GDP - as against 5.2% of GDP spent on all 950 central sector and centrally sponsored sub-schemes (actual allocation of 2016-17). So, fiscal space exists - but only if UBI replaces all existing Central govt. schemes.
- Income transfer: Income transfer through DBT and by replacing all Central schemes, using Aadhaar.
- Use gradualism - like starting with women, elderly, widows, disabled etc.
Pros and Cons of Universal Basic Income
Key-highlights of Universal Periodic Review (UPR)-III
- In a first, NHRC, submitted a mid-term report to the United Nations on the human rights situation in the country, highlighting the government’s policies on climate change, rights of women, children, disabled, and the elderly, and the right to food, work and health.
- In the report, Universal Periodic Review (UPR)-III, the UN has been informed that the Indian government is examining and “actively considering” the possibility of a universal basic income to reduce poverty.
- The government has focused cash transfer schemes aimed at farmers, especially, but no universal cash transfer programme.
- As part of UPR-III, the Indian government accepted 152 recommendations out of 250 by 112 UN member states in September 2017 pertaining to poverty alleviation, rights of women, children, persons with disabilities, elderly, marginalized populations and right to education etc.
- However, it refused to accept 98 recommendations including repeal of the Armed Forces (Special Powers) Act, a moratorium on the death penalty, violence against marginalized groups and concerns over the Foreign Contribution Regulation Act (FCRA), a law regulating foreign funding to non-governmental organizations etc.
Universal Periodic Review (UPR)
- UPR is an international peer review mechanism based on a periodic self-assessment by each country of its human rights record, achievements and challenges, which is supplemented by reports from UN human rights experts, entities, treaty bodies, national human rights institutions, and civil society organizations.
- India was one of the first countries to be reviewed under the UPR mechanism.
Why UBI is urgently needed in India?
- Universal basic income (UBI) programme can be a solution that could mitigate the looming crisis caused by dwindling job opportunities.
- UBI is also deliberated as an effective poverty-eradication tool. Supporters of this scheme include Economics Nobel Laureates Peter Diamond and Christopher Pissarides, and tech leaders Mark Zuckerberg and Elon Musk.
- UBI in its true sense would entail the provision of an unconditional fixed amount to every citizen in a country.
- Nevertheless, countries across the world, including Kenya, Brazil, Finland, and Switzerland, have bought into this concept and have begun controlled UBI pilots to supplement their population.
- India’s huge capacity and infrastructure-building requirements will support plenty of hands in the foreseeable future.
The concept of UBI, if becomes a reality in India will promote many of the basic values of a society which respects all individuals as free and equal. It would also promote liberty because it is anti-paternalistic, opens up the possibility of flexibility in labour markets. It promotes equality by reducing poverty. It promotes efficiency by reducing waste in government transfers. And it could, under some circumstances, even promote greater productivity.