There has been a lot of discussion on universal basic income (UBI) in both developed and developing countries. The primary objective is to enable every citizen to have a certain minimum income. The term universal is meant to connote that the minimum or basic income will be provided to everyone irrespective of whatever their current income is. The adoption of a universal basic income can impose a burden on the fisc which is well beyond the capabilities of most developing countries, including India. In discussing the applicability of the concept of basic income to India, three questions arise. The first is whether it should be universal or restricted; the second is what the level of minimum income is and how this is to be determined; and the third is about the financing mechanism for implementing such a scheme.
Also Read
Time ripe for discussions on Universal Basic Income
Above all, there is a philosophical question, whether support to vulnerable sections should be in the form of goods and services or as cash. Cash gives the discretion to beneficiaries to spend it any way they like. But it is assumed they would be wise in their discretion. On the other hand, the provision of services or goods directly to beneficiaries may be directed to achieve certain objectives in terms of nutrition or health or education. In the provision of services, the concern is about leakages and quality of service. Some countries have adopted a middle path of conditional transfers, which means that transfers in the form of cash are subject to the condition that they are spent on meeting defined needs.
However, as far as India is concerned, we are not starting with a clean state. There are a whole lot of services provided by the state, and it would be impossible to knock them off and substitute them with general income support. We need to think of income support as a supplement to services already provided even though a hard look at some of the provisions is absolutely essential. Poor quality of services from government-run institutions has become a matter of concern.
Also Read
The price of fiscal folly
Coming to the concept of the UBI, it is necessary to first decide whether income supplements should be universal or limited to certain easily identifiable groups. Most calculations involving the provision of income to one and all are beyond the capabilities of the present Central government Budget unless the basic income is fixed at too low a level. It is extremely difficult to cut so-called implied subsidies or hidden subsidies in order to fund resources, as some proponents argue. These supports range from subsidised bus fares to subsidised power tariff. The attempt must be to think in terms of reducing the number of beneficiaries using easily definable criteria. Elaborate exercises for identification will defeat the purpose. It is true that a universal scheme is easy to implement. Feasibility is the critical question. There is also the consideration of fairness. But strict targeting will run into complex problems of identification.
The issue whether the scheme should be universal or restricted depends on the level of basic income that is proposed to be provided. If we were to treat the cut-off used to define poverty as the minimum income, then the total fiscal burden would be enormous. This apart, there is no consensus regarding what that cut-off should be. Our analysis using different poverty lines shows that poverty is concentrated around the poverty line. In fact, more than 60% of the total poor lies between 75% of the poverty line and the poverty line. Therefore, what is needed is a supplement to fill the poverty gap. One alternative would be to determine the required income supplement from the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). The total annual income supplement can be equivalent to 100 days of the wages prescribed under the MGNREGS. This is equivalent to 20,000 per year. This amount can be treated as the income supplement.
Also Read
The hidden agenda of benevolence
The next question is who the beneficiaries should be. Here again, it is difficult to cover the entire population. Even providing one person per household with this income will mean 5 lakh crore per annum, which is 3.3% of GDP. Perhaps what is feasible is a scheme which limits the total expenditure to around 1.5 to 2% of GDP, which is between 2 lakh crore and 3 lakh crore. We need to evolve a criterion which can restrict the total cost to this amount. One way of doing it will be to limit it to all women above the age of 45. This is an easily identifiable criterion because Aadhaar cards feature the age of the person. However, this is only one alternative. But others may be thought of. Restricting the beneficiaries to the elderly or widows or those with disabilities may have only a limited impact. Making available a minimum of 20,000 per year for almost 10 crore people which means a total expenditure of 2 lakh crore must make a dent on poverty since at least half of them would be for the poor or people a little above the poverty line.
The feasibility of raising even 2 lakh crore is not easy. Some analysts have suggested that we can remove all exemptions in our tax system which would give us enough money. Apart from the difficulties in removing all exemptions, tax experts advocate removing exemptions so that the basic tax rate can be reduced. Perhaps, out of the 2 lakh crore which is needed, 1 lakh crore can come from the phasing out of some of the expenditures while the remainder must come from raising additional revenue. Perhaps, one can phase out the MGNREGS, which will realise close to 40,000 crore. The employment scheme is very akin to the proposed scheme. Fertilizer subsidies are another item of expenditure which can be eliminated. Perhaps, requesting higher income groups to forego supplemental income will reduce the expenditure, as has been done successfully in the case of cooking gas.
To conclude, introducing the UBI is unrealistic. In fact, the concept of a basic income must be turned essentially into a supplemental income. Such a scheme will be feasible provided we restrict the beneficiaries to groups which can be easily identified. This restriction essentially comes from fiscal compulsions. Regarding finances, it is not easy to remove all implicit subsidies. The design for financing the scheme has to be viewed in a more pragmatic way. Restricting the fiscal burden to 1.5 to 2% of GDP seems desirable and feasible. Half of this can come from phasing out some of the existing expenditures while the other half can come by raising fresh revenue. Lastly, the proposal here refers only to the income supplement that can be provided by the Central government. Similar efforts can be made by the respective State governments, if they so desire.
C. Rangarajan is a former Chairman of the Economic Advisory Council to the Prime Minister and a former Governor, Reserve Bank of India. S. Mahendra Dev is Director and Vice Chancellor, Indira Gandhi Institute of Development Research, Mumbai
Read the original here:
Let's talk about a supplemental income - The Hindu
- Income inequality in the United States - Wikipedia - January 5th, 2017 [January 5th, 2017]
- Basic Income as All-inclusive Democratic Subsidy - Basic Income News - February 7th, 2017 [February 7th, 2017]
- Basic income is superior to the job guarantee - Basic Income News - February 7th, 2017 [February 7th, 2017]
- CANADA: Over 10000 people have signed to support Basic Income - Basic Income News - February 7th, 2017 [February 7th, 2017]
- A response to 'The dangers of a basic income' - Basic Income News - February 7th, 2017 [February 7th, 2017]
- Ebay founder backs universal basic income test with $500000 pledge - Mashable - February 9th, 2017 [February 9th, 2017]
- OPINION: Human rights, basic needs - The Guardian - February 10th, 2017 [February 10th, 2017]
- Left-Wing America Steps Up Calls For Free Money, Jobs Guarantee - Daily Caller - February 10th, 2017 [February 10th, 2017]
- Guaranteed basic income proposed. - Bayshore Broadcasting News Centre - February 15th, 2017 [February 15th, 2017]
- World Economic Forum blog: Canada's basic income experiment will it work? - Basic Income News - February 16th, 2017 [February 16th, 2017]
- Expert: We Can Have Universal Basic Income and Jobs - Futurism - Futurism - February 18th, 2017 [February 18th, 2017]
- Ben Wray: Why both the right to work and the right not to work can set us free - CommonSpace - February 20th, 2017 [February 20th, 2017]
- VIDEO: Basic Income presentation at Meeting of the Minds Summit - Basic Income News - February 22nd, 2017 [February 22nd, 2017]
- Australia Needs A Universal Basic Income, And We Should Start ... - Huffington Post Australia - February 24th, 2017 [February 24th, 2017]
- A guaranteed income isn't the solution to widespread unemployment - Acton Institute (blog) - March 1st, 2017 [March 1st, 2017]
- Industry body bats for universal basic income for women - Times of India - March 8th, 2017 [March 8th, 2017]
- Basic Income in Argentine News - Basic Income News - March 10th, 2017 [March 10th, 2017]
- Basic-income guarantee is way to end poverty - Times Colonist - March 11th, 2017 [March 11th, 2017]
- Letters: Guaranteed income guarantees sloth - The Province - June 6th, 2017 [June 6th, 2017]
- Universal basic income: guarantee pay as way to improve quality of life - WatertownDailyTimes.com - June 6th, 2017 [June 6th, 2017]
- About That Universal Basic Income Idea - FITSNews - June 6th, 2017 [June 6th, 2017]
- Basic income plan doable: Northern study - The Sudbury Star - June 6th, 2017 [June 6th, 2017]
- Study of Iran's basic income shows it did not harm employment - Basic Income News - June 7th, 2017 [June 7th, 2017]
- Should all Americans receive a guaranteed income? - First Coast News - June 20th, 2017 [June 20th, 2017]
- Should all Americans receive a guaranteed income? - KPNX 12 News TV - June 21st, 2017 [June 21st, 2017]
- Should all Americans receive a guaranteed income? - 9NEWS.com - June 21st, 2017 [June 21st, 2017]
- Should all Americans receive a guaranteed income? - KHOU - June 24th, 2017 [June 24th, 2017]
- Net incomes under a Basic Income system - Basic Income News - July 1st, 2017 [July 1st, 2017]
- Basic Income Guarantee program moving forward for 2000 Lindsay residents - Kawartha Media Group - July 8th, 2017 [July 8th, 2017]
- UBI is just a bedtime story Elon Musk tells himself to help the super-wealthy sleep - Quartz - July 14th, 2017 [July 14th, 2017]
- NDP leadership candidate visits Guelph (8 photos) - GuelphToday - July 18th, 2017 [July 18th, 2017]
- Does Basic Income Solve Anything? Grasp the Arguments for and ... - Futurism - July 21st, 2017 [July 21st, 2017]
- Value in using tax system for basic income: Report - The Sudbury Star - July 21st, 2017 [July 21st, 2017]
- NEW ORLEANS, LA, US: Local basic income group begins to hold monthly meetings - Basic Income News - July 25th, 2017 [July 25th, 2017]
- More Calgarians struggle to feed their families over the summer months - CBC.ca - July 26th, 2017 [July 26th, 2017]
- Renfrew County dietitian recognized by board of health for provincial award - www.insideottawavalley.com/ - July 27th, 2017 [July 27th, 2017]
- EDITORIAL: Island needs dollars, not data, to cope with poverty - The Guardian - July 29th, 2017 [July 29th, 2017]
- DON PRIDMORE: Be careful what you wish for... - The Guardian - August 1st, 2017 [August 1st, 2017]
- Is a Well-Paying Job the next Entitlement Program? - Big Think (blog) - August 5th, 2017 [August 5th, 2017]
- Universal basic income proponent to speak in Boise - Idaho Press-Tribune - August 7th, 2017 [August 7th, 2017]
- Hashtag Trending Battery-free phone, Apple's China backlash - IT World Canada - August 10th, 2017 [August 10th, 2017]
- New Zealand Fabians host Basic Income panel - Basic Income News - August 13th, 2017 [August 13th, 2017]
- Universal Basic Infrastructure to help decrease India's poverty - Economic Times - August 14th, 2017 [August 14th, 2017]
- After lifting minimum wage, NDP government prepares to consult public about reducing poverty - Straight.com - August 16th, 2017 [August 16th, 2017]
- How Cities Can Rebuild the Social Safety Net - CityLab - August 24th, 2017 [August 24th, 2017]
- Food shopping at dollar stores | Brantford Expositor - Brantford Expositor - August 24th, 2017 [August 24th, 2017]
- 'Me too' and the basic income guarantee | Basic Income News - February 6th, 2018 [February 6th, 2018]
- Basic Income Now | It's time for dignity for all - March 17th, 2018 [March 17th, 2018]
- Is a Basic Income Guarantee the Right Choice for Ontario? - June 27th, 2018 [June 27th, 2018]
- The Ethics and Economics of the Basic Income Guarantee ... - September 18th, 2018 [September 18th, 2018]
- Basic Income Guarantee - Your Right to Economic Security ... - November 8th, 2018 [November 8th, 2018]
- Basic income could end food insecurity - Upstream - January 3rd, 2019 [January 3rd, 2019]
- 'Hartz reforms': how a benefits shakeup changed Germany ... - January 28th, 2019 [January 28th, 2019]
- Quick notes from Basic Income Guarantee Panel - falicon.com - January 28th, 2019 [January 28th, 2019]
- New book reviews the Namibian Basic Income pilot - Basic Income News - October 1st, 2019 [October 1st, 2019]
- Democrats focus on some Midwestern issues at Westerville debate, a departure from past three forums - cleveland.com - October 16th, 2019 [October 16th, 2019]
- Assembly Elections 2019: Why is the Congress evasive about NYAY scheme this poll season? - Moneycontrol.com - October 16th, 2019 [October 16th, 2019]
- Letter to the Editor: Universal basic income is inevitable as we head toward a fully automated society - The Post - October 16th, 2019 [October 16th, 2019]
- Democratic debate highlights: best and most substantive answers of the night - Vox.com - October 16th, 2019 [October 16th, 2019]
- Sanders: 'Damn right we will' have a job for every American | TheHill - The Hill - October 16th, 2019 [October 16th, 2019]
- 'Most Americans Don't Want To Work for the Federal Government' Says Andrew Yang, Trashing Federal Jobs Guarantee - Reason - October 16th, 2019 [October 16th, 2019]
- Basic Income as 40 Acres and a Mule - Basic Income News - October 16th, 2019 [October 16th, 2019]
- WAYNE YOUNG: Island voices must be heard - The Guardian - December 15th, 2019 [December 15th, 2019]
- The Guardian view on Finlands new PM: a different type of leadership - The Guardian - December 15th, 2019 [December 15th, 2019]
- 5 Psychological Forces That Turn People into Political Hacks | Aaron Pomerantz - Foundation for Economic Education - January 13th, 2020 [January 13th, 2020]
- P.E.I. groups say basic Income should not replace addictions, other supports - The Journal Pioneer - January 27th, 2020 [January 27th, 2020]
- Trump to let states overhaul Medicaid for the poor, seeking to change Obamacare without legislation - Washington Examiner - January 30th, 2020 [January 30th, 2020]
- Find ways to improve the revenue of farmers: Congress - The Hindu - January 30th, 2020 [January 30th, 2020]
- Eliminating Child Poverty With a Government Check - The New York Times - January 30th, 2020 [January 30th, 2020]
- Andrew Yang Expects 'Many' of His Supporters to Back Sanders in Iowa: We 'Have a Lot of Overlap' - Newsweek - January 30th, 2020 [January 30th, 2020]
- Life, Liberty, and Basic Income | Opinion - Harvard Crimson - February 29th, 2020 [February 29th, 2020]
- Lockdown to fight coronavirus is going to hit most Indian workers very hard - Livemint - March 26th, 2020 [March 26th, 2020]
- Beware of a lopsided lockdown - The Hindu - March 26th, 2020 [March 26th, 2020]
- We face a war against coronavirus and must mobilise accordingly | Free to read - Financial Times - March 26th, 2020 [March 26th, 2020]
- Coronavirus: Iain Duncan Smith says dont bring in universal basic income during pandemic as it would be disincentive to work - The Independent - March 26th, 2020 [March 26th, 2020]
- Solidarity Economicsfor the Coronavirus Crisis and Beyond - The American Prospect - March 26th, 2020 [March 26th, 2020]
- I've lived through plenty of social shocks this time we must learn the lessons - The Guardian - March 31st, 2020 [March 31st, 2020]
- Common Arguments Against Basic Income Don't apply to the Emergency BI - Basic Income News - March 31st, 2020 [March 31st, 2020]
- How a Basic Income And Jobs Guarantee Can Save The Economy From Coronavirus - The National Interest - March 31st, 2020 [March 31st, 2020]
- Starvation in the time of Corona: momentum for the Universal Basic Dividend - DiEM25 - May 9th, 2020 [May 9th, 2020]