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A basic income for all: will it work or will it not?

Switzerland voted it down, Finland is currently experimenting with it, and India is talking about it. So what are the arguments against and in favour?

india Updated: Feb 03, 2017 16:01 IST
Garima Garg
Government is considering giving every Indian a basic income. Will it work? REUTERS/Adnan Abidi
Government is considering giving every Indian a basic income. Will it work? REUTERS/Adnan Abidi

Economies around the world are buzzing with the idea of a basic income, given to all citizens irrespective of their employment status. Switzerland voted it down, Finland is currently experimenting with it, and India is talking about it. The economic survey 2016-17, released Tuesday, dedicated an entire chapter to it, entitled, provocatively, Universal Basic Income: A Conversation With and Within the Mahatma.

Prefaced with Mahatma Gandhi’s ideas on social welfare and fruits of earned labour, the chapter is an exploration of universal basic income as it could potentially take shape in India. While the survey doesn’t pin down a particular basic income amount, it could be anything between a little over Rs.3000 to 12,000 per year.

So what are the arguments against and in favour?

PRO: The robots are taking over

Proponents say that with increasing automation in the economy, many people find themselves out of work because their skills are outdated. In fact, as per a Manpower report released at World Economic Forum in Davos recently, Indian workers too will be significantly impacted by automation in the near future. To help such workers sustain themselves at the most basic level, it might help in the future to give everyone a basic income.

CON: But it will disincentivise work

Opponents, however, are worried that such a dole will make people lazy, and they will opt out of work instead supporting themselves on the basic income.

PRO: Universal welfare works because it is given to everyone

The latest economic survey reports that 40% and 65% of the targeted populations never received the benefits of food subsidy and employment guarantee, MGNREGA, respectively. The problem of misallocation also leads to the poorest areas of country getting a lower share of government benefits as compared to their richer counterparts, as per the report. However, with a basic income that is given to all (or at least 75% of India’s population), that problem can be significantly avoided since it need not be claimed. It will simply reflect in the person’s bank account.

CON: But what if the government decides to roll it out selectively?

At the same time, the survey also proposes to roll out the UBI on a selective basis at first. The UBI will be rolled out for vulnerable groups like pregnant women, widows, senior citizens and those who are physically or mentally weaker. But this undermines one of the strongest arguments in favour of universal welfare: it works because it is given to everyone. Rolling it out selectively and in phases could create misallocation issues which could then make it difficult for the government to push forward with the UBI for all.

PRO: Relief from the middle man’s exploitation

Because the implementation will be done through the JAM (Jan Dhan accounts-Aadhar cards-Mobile) ecosystem, it will ensure a direct and hassle free transfer of the benefit to the people.

CON: But do we have the infrastructure to support electronic transfer of basic income?

Only one in five Indians has a Jhan Dhan account, as per the survey report. Further, of these, less than 60% of them are linked with Aadhar. This poses a considerable challenge to the idea of universal basic income in India.

PRO: Use your money as you like

Delivered as a direct cash transfer, the UBI will empower the people insofar as it will allow them to decide what they want to do with the money. In such a scenario, some say there is a risk that the money will be used on alcohol and tobacco, known as temptation expenditure. Yet a field experiment in Madhya Pradesh seemed to disprove that theory: villagers who received the basic income spent more on health care, entrepreneurial ventures, and children.

CON: But what if people don’t even get the money?

On the other hand, as noted by the economic survey report, evidence from Chandigarh and Pondicherry raises questions. Last year, in lieu of the food public distribution system, people were given cash or direct benefit transfers. Yet almost half the residents claimed they never received the money at all, according to a study undertaken by Abdul Latif Jameel Poverty Action Lab.

PRO: Just another dole or one dole replaces all?

The Finance Minister, Arun Jaitley, after presenting the budget on February 1, in an interview to DD News remarked that clubbing all subsidies together and giving the poor one basic income cheque sounds “wonderful.”

CON: But are our politicians prepared to let that happen soon?

In the same interview, Jaitley also said that India’s politics isn’t yet mature enough to allow for phasing out of all other doles in favour of this new dole. The economic survey report too considers it an impossibility in the short term.