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Insights into Editorial: Basic income works and works well


Insights into Editorial: Basic income works and works well


 

Introduction:

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.

 

Universal Basic Income:

Basic income refers to a minimum income which can provide for basic necessities sufficiently for all. A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work.

It should be given to all irrespective of their employment status. Additionally, even post education if a person is not employed, he / she should be given the basic income.

Sikkim is set to become the first state in India to roll out Universal Basic Income (UBI), an idea that is, like many rights, both unconditional and universal, one that requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens.

The five broad features of such schemes are:

  • Payments at periodic regular intervals (not one-off grants),
  • Payments in cash (not food vouchers or service coupons),
  • Payments to individuals,
  • Universality, and

 

Is UBI is better than Regular Farm Loan Waivers?

The promises made with the opposition parties in centre and states of farm loan waivers. No doubt this policy would lessen the burden on a hard-pressed social group, and lessen rural poverty, but it is a populist measure.

  • It will be popular, but will not alter structures and is bad economics.
  • Suppose the principle were generalised. If one type of loan could be declared non-repayable, why not others?

 

  • Unless one can show that a debt is odious or illegal per se, it would be a dangerous precedent to declare that one type of debt and not others need not be repaid.

 

  • In the long term, financial institutions would be less likely to extend loans to small-scale farmers.

 

  • If the loans were made on fair rules, it would be better to enable the debtors to pay them back less onerously.

That is why a basic income would be a more equitable and economically rational way of addressing what is undoubtedly an unfolding rural tragedy.

The idea of an income support scheme for farmers draws from the Rythu Bandhu scheme initiated by the Telangana government which may have helped the government storm back to power.

Unlike farm loan waivers or minimum support prices for specific crops, a Rythu Bandhu-type income support scheme does not damage credit culture or distort markets.

However, the Rythu Bandhu scheme excludes tenant croppers who consist of around 13.7% of farm holdings all across India.

 

Benefits from Basic Income Provision:

Studies and surveys on the basis of trials and pilot studies have reported various benefits of providing basic income to people which are as follows:

 

  • The nutrition intake of those suffering from poverty rose. Data provides that consumption of pulses, fresh vegetables and meat was up by huge number of 1,000%, 888% and 600% respectively.

 

  • People were also able to spend more on healthcare and as a result, incidence of illness dropped.
  • Among other social indicators education also witnessed progress in terms of enrolment and attendance, especially among female students.

 

  • Basic income lived up to its rationale of reducing the gap between rich and poor and led to more equitable development.
  • People living in villages worked harder than before and also took up multiple economic activities with the help of the basic income.

 

  • With this confirmed source of income, indebtedness of people decreased and the capacity to save increased, hence placing them in a better financial position.

 

  • Basic income acts as a kind of a social security for the weak, unwell or physically challenged.

 

  • Also for people who are skilled and have employment but are not able to receive quality wages due to lack of opportunities or other reasons, basic minimum income acts as a supplement to the existing economic resources.

 

Conclusion:

Along with the National Food Security Act, MGNREGA, a plan for provision of basic income can be a game changer for the country.

The Government of India has also decided to dedicate a special chapter to basic income as a tool for poverty reduction in the Economic Survey.

The beauty of moving towards a modest basic income would be that all groups would gain.

That would not preclude special additional support for those with special needs, nor be any threat to a progressive welfare state in the long-term.

UBI envisages an uncompromised social safety net that seeks to assure a dignified life for everyone, a concept that is expected to gain traction in a global economy buffeted by uncertainties on account of globalisation, technological change, and automation.

The Economic Survey 2017 devoted an entire chapter to its merits, concluding that “the Mahatma would have been conflicted by the idea but, on balance, might have endorsed it”.

It would merely be an anchor of a 21st century income distribution system.