Recently the Chief economic advisor Arvind Subramanian raised a very pertinent debate in the economic survey regarding adopting a scheme of Universal Basic Income unconditionally to improve the basic leaving standard of all the Indians and offer them freedom and choice to choose the priority  goods and services which enhance their living standard and welfare. Indian economy has traversed a long distance since it embraced planning in 1951. India is the fourth largest economy according to world Bank GDP (purchasing power parity) based of the world ranking. It is counted among the major emerging economies in the world and a member of the BRICS and the G-20. But poverty and inequality in India is still persisting more than it should be at its present level of development. People and households still lack many basic needs.

What is Universal Basic Income (UBI)?

Universal basic income is a form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere. An unconditional income transfer of less than the poverty line is sometimes referred to as a partial basic income.

Basic income systems that are financed by the profits of publicly owned enterprises (often called social dividend or citizen’s dividend) are major components in many proposed models of market socialism. Basic income schemes have also been promoted within the context of capitalist systems, where they would be financed through various forms of taxation. Prominent advocates of the concept include Philippe Van Parijs, Ailsa McKay, André Gorz, Hillel Steiner, Peter Vallentyne, and Guy Standing.

Has any country adopted UBI?

So far no country has adopted UBI, but active consideration of such schemes are being given in Europe, America, Asia and Africa and even in Latin America.

Basic income has been discussed and advocated for in United Kingdom for much of the 20th and 21st century. It started with the writings by Major C.H Douglas and Dennis Milner around 1920, got a down period during the war times, and is today still a political proposal or reform that the main political parties in England either won’t touch or are simply against. However, there are some parties who are pro-basic income, most notably the Scottish National Party, which at its spring 2016 conference backed the principle of a universal basic income to replace the current welfare system.

The debate in France started in the 1970s but as elsewhere in Europe it took a long time for it to become a major political issue. However, in 2015 the regional parliament in Aquitaine voted for an implementation of some kind of basic income experiment. In January 2016, the Conseil national du numérique, a public Advisory body on Digital Affairs released a report which recommends to examine and experiment basic income.

The debate about basic income started to grow in the 1980s when groups of unemployed people came out in favor of the reform. For many years the idea was only supported openly by some academics, such as Claus Offe, and a few politicians and organizations. However, after the Hartz reforms, introduced by the Cabinet of Gerhard Schröder in 2003-2005 and subsequently modified, a debate regarding basic income was triggered. 2009, Susanne Wiest, a house wife, made a presentation in the German Parliament about the basic income petition she had initiated and which received support from 52.973 people. 2010 there were several basic income demonstrations, the biggest in Berlin. 2011 the Pirate Party decided to advocate for a basic income alongside minimum wages.

Historically in Belgium, the most active group promoting basic income is the movement Vivant and the philosopher Philippe Van Parijs, who founded the Basic Income European network (BIEN) in 1987. A Belgian basic income network affiliated to the BIEN was founded in 2012 in Brussels.

 The first bigger discussion on universal basic income in the Czech Republic was initiated by philosophers and social scientists Marek Hrubec and Martin Brabec.  In the 1970s, Finnish researchers were inspired by Milton Friedman’s proposal for a negative income tax.  In 1994, Osmo Soininvaara wrote a book advocating basic income.

The Young Finns advocated basic income in the 1990s. The Centre Party began advocating liberalization of labor markets and basic income in the end of the 1990s.  In 2003, the Research Institute of the Finnish Economy published the book “Kansantalous 2028” (“Economy 2028”), which concluded that a basic income and a flat income tax rate would be a good solution. In 2007, Kansallinen sivistysliitto published the paper “Sisällä vai ulkona – kohti perustuloa?”, which advocated basic income. In 2007-2011, the centre-right government was interested in adopting a basic income system. However, the SDP and trade unions affiliated with the party were aggressively opposed to basic income.

 In Japan, New Party Nippon and the Greens Japan support basic income, along with some economists such as Toru Yamamori and Kaori Katada. From January 2008 to December 2009, a pilot project with basic income grant was implemented in the Namibian villages of Otjievero and Omitara. The project was organized by the Namibian Basic Income Grant Coalition. Six months after the launch, the project was found to have significantly reduced child malnutrition and increased school attendance. In South Africa the Democratic Alliance has advocated basic income.

Two basic income pilot projects have been underway in India since January 2011. According to the first communication of the pilot projects, positive results have been found. Villages spent more on food and healthcare, children’s school performance improved in 68 percent of families, time spent in school nearly tripled, personal savings tripled, and new business startups doubled.

Arguments in favour of UBI

Paul Mason stated that universal basic income would increase social security costs, but that it would also reduce the high medical costs associated with diseases of poverty, by reducing stress, diseases like high blood pressure, type II diabetes etc. would become less common. Supporters commonly make three very different arguments that Basic Income promotes freedom. First, although most Basic Income supporters tend to be politically left, right-leaning supporters, at least since the 1970s, have argued that policies like Basic Income free welfare recipients from the paternalistic oversight of conditional welfare-state policies. Second, Philippe Van Parijs has argued that basic income at the highest sustainable level is needed to support real freedom, or the freedom to do whatever one “might want to do.

“By this, Van Parijs means that all people should be free to use the resources of the Earth and the “external assets” people make out of them to do whatever they might want to do.Money is like an access ticket to use those resources, and so to make people equally free to do what they might want to do with the external assets of the world, the government should give each individual as many such access tickets as possible—that is, the highest sustainable Basic Income. Third, at least since Thomas Paine, some supporters have argued that Basic Income is needed to protect the power to say no, which these supporters argue is essential to an individual’s status as a free person. If some other group of people controls resources necessary to an individual’s survival, that individual has no reasonable choice other than to do whatever the resource-controlling group demands.

Equity and Freedom

Before the establishment of governments and landlords, individuals had direct access to the resources they needed to survive. But today, resources necessary to the production of food, shelter, and clothing have been privatized in such a way that some have gotten a share and others have not. Therefore, this argument goes, the owners of those resources owe compensation back to non-owners, sufficient at least for them to purchase the resources or goods necessary to sustain their basic needs.

This redistribution must be unconditional because people can consider themselves free only if they are not forced to spend all their time doing the bidding of others simply to provide basic necessities to themselves and their families. Under this argument, personal, political, and religious freedom are worth little without the power to say no. In this view, basic income provides an economic freedom which, combined with political freedom, freedom of belief, and personal freedom establish each individual’s status as a free person.

Disadvantages

There is also a belief among critics that if people have free and unconditional money they will not work (as much) and get lazy. Less work means less tax revenue and hence less money for the state and cities to fund public projects. There are also concerns that some people will spend their basic income on alcohol and drugs. If there is a disincentive to employment because of basic income, it is however expected that the magnitude of such a disincentive would depend on how generous the basic income were to be.

Some campaigners in Switzerland have suggested a level that would only just be liveable, arguing that people would want to supplement it. However, in studies of the Mincome experiment in rural Dauphin, Manitoba, in the 1970s, the only two groups who worked significantly less were new mothers and teenagers working to support their families. New mothers spent this time with their infant children, and working teenagers put significant additional time into their schooling.

Key principles of affordability

A 2012 affordability study done in the Republic of Ireland by Social Justice Ireland found that basic income would be affordable with a 45 percent income tax rate. This would lead to an improvement in income for the majority of the population. Charles M.A. Clark estimates that the United States could support a Basic Income large enough to eliminate poverty and continue to fund all current government spending (except that which would be made redundant by the Basic Income) with a flat income tax of just under 39 percent.

The case for basic income affordability can be summarized  as follows:

  • Welfare substitution: Basic income would substitute to a wide range of existing social welfare programmes, tax rebates, state subsidies and work activation spendings. All those budget (including administrative costs) would be reallocated to finance basic income
  • Auto-financing of basic income: although basic income is paid to everyone universally, most people whose earnings are above the median income are in fact net contributors to the basic income scheme, mainly through an income tax. In practice this means that the net cost of basic income is much lower than the raw cost calculated as a sum of monthly payements to the whole population.
  • More fiscal redistribution: in addition to reforming and optimizing the existing tax systems, additional taxations can be implemented to fully finance a basic income scheme. Some proposals frequently mention to this effect the need for a tax on capital, carbon tax, financial transaction tax etc. which do not currently exist in most jurisdictions.
  • Money creation:In addition to tax reforms, the power of central banks to create money could be used as one funding channel for basic income.

Case for UBI in India

The adoption of Universal Basic Income scheme has many advantages. And apprehensions that need to be discussed before taking initiatives for this. India is an emerging economy and fastest growing among the major economies. But it is the home of about 25 per cent of the global poor and the basic health and education facilities are not accessible to a very large proportion of population. India realized in mid seventies that the trickle down of fruits of development during its planning era had not been very effective, it adopted many programmes of poverty alleviation and employment generation in the early eighties such as Integrated Rural Development Programme (IRDP), RLEGP (Rural Employment Guarantee Schemes), Training of Rural Youth for Self Employment (TRYSEM) and National Rural Employment Programme (NREP) and later crop insurance and farmers credit card schemes.

These wage employment programmes and durable asset creating programmes continued by different names such Swarnajayanti Gram Swarojgar Yojana and Swarnajayanti Shahri Swarojgar Yojana etc. In 2005 India launched an employment guarantee and insurance scheme named MNREGA.  But these programmes were marked by leakages, corruption and mis-targeting the beneficiaries. Now it is realized that delivery of these programmes can be improved through direct benfit transfer by using JAM trinity for avoiding leakages and wrong targeting.

How UBI could be adopted in India

The Chief Economic Adviser Mr.Subramanian recently said that the Universal Basic Income (UBI) advocated by the Economic Survey can be put in place only after the withdrawal of existing welfare schemes. According to him the cost of this programme (UBI) is so huge that it cannot be an add-on to the existing programmes as the government cannot afford it and the government’s finances will go bust. He asserted that UBI is about upliftment of the poor in India.

The need for the same arises because lot of money spent by government on social welfare schemes does not reach the targeted audience. He cited the example of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in which, he said “the most deserving in the society are often left out”. Also, relatively more progressive states such as Tamil Nadu and Andhra Pradesh had implemented the scheme better than states such as Bihar and Uttar Pradesh.

Need for operational JAM Trinity

One of the pre-requisites for UBI to be successful is a functional Jan Dhan, Aadhaar and Mobile system that ensures cash transfers directly to the accounts of beneficiaries, Subramanian said, adding one of the challenges in implementing UBI is that 350 million people in India do not have a smartphone or even a phone— another area of concern.

Will unconditional money be wastage?

He countered the notion that putting money directly in the bank accounts of the poor will mean that the beneficiaries are going to squander it, calling it an elitist argument. Despite UBI having high appeal it would be difficult to adopt it until the old/existing prorammes are withdrawn.  He also said that it was puzzling that while developing countries such as India were converging and growing faster than developed countries; wide disparities exist among the states of India. In the last 15 years, poorer states are growing slower than progressive ones. He dubbed the disparities within India  as a deep puzzle because this has happened despite high inter-state migration and high levels of internal trade that contributes 55-56% of India’s GDP—more than in the European Union and Canada, where it is 20% of GDP.

 

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