The UBI net

Mains Paper 5: Economy
Prelims level: Universal Basic Income
Mains level: Economic growth and development

Context

•  The Sikkim Democratic Front intends to make implementation of Universal Basic Income (UBI) a key promise in its manifesto for the upcoming assembly elections in April-May.
•  The ruling party of India’s smallest state claims that it will roll out the scheme fully by 2022.

Comparing UBI with other government schemes

•  UBI has intrinsic appeal as well as advantages over normal welfare schemes.
•  By providing every household a minimum income through unconditional cash transfers, the beneficiaries of government programmes cease to be subjects.
•  Instead, they are seen as having agency and as being better placed to take economic decisions in their own interest than an all-knowing state.
•  A certain assured income also provides a safety net in a market economy where job losses, health shocks or death of breadwinners can push back families to below subsistence levels.
•  UBI is, moreover, easy to implement, unlike anti-poverty schemes that suffer errors both of exclusion (the deserving being left out) and inclusion (the undeserving benefiting) even with the best of targeting.
•  With Aadhaar-seeded bank accounts becoming ubiquitous, there’s nothing simpler and less leakage-prone than transferring a predetermined sum of money every month to everyone barring, say, households whose members file income tax or have government jobs.

Where is the money to implement such a scheme?

•  Even if two-thirds of India’s 30 crore-odd households were to be given a Rs 1,000 monthly UBI, it would annually cost around Rs 2.4 lakh crore.
•  There could be savings through rationalisation of subsidies there is definitely scope to raise the price of wheat and rice sold through the public distribution system (PDS) from the current Rs 2-3/kg levels, besides making farmers pay more for urea and scrapping of a majority of wasteful and ineffective welfare schemes.
•  However, these measures are easier said than done.
•  The very fact that urea prices haven’t been raised since April 2010 and PDS grain is sold as cheap as almost two decades ago is proof that any new scheme adds to, and doesn’t replace, the earlier ones.
•  Sikkim’s fiscal and debt liabilities position is better than many other states.
•  It also has significant saleable surplus power, which, along with revenues from tourism, can possibly fund a UBI for a just over six-lakh population.
•  The same cannot be said for other states or even the Centre.

Conclusion

•  The fiscal space to implement a new MGNREGA-scale programme is much larger and simply non-existent today.
•  It makes sense, if at all, to go in for a UBI in a calibrated manner, starting with monthly pensions for all households having senior citizens and pegging this at a minimum Rs 1,000.
•  The UBI net can be gradually widened by giving beneficiaries the choice of either availing it or continue with their existing entitlements.
•  One wouldn’t be surprised to find more people, over time, opting for money that they can spend as they see best.

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Prelims Questions:

Q.1) Which of the following can be the advantages of adopting Universal Basic Income?
1. It promotes equality by reducing poverty.
2. It promotes efficiency by reducing waste in government transfers
3. It opens up the possibility of flexibility in labour markets.

Select the correct answer using the code given below.
(a) 1 and 3 only
(b) 2 only
(c) 1 and 2 only
(d) 1, 2 and 3

Answer: D

Mains Questions:
Q.1) As an idea, Universal Basic Income has appeal and advantages over normal welfare schemes. But where is the money? Critically examine the statement.