The argument in favour of a Universal Basic Income comes from a realisation that unemployment is on the rise and therefore getting jobs will not be easy. Despite all good intention, the government has not been able to encourage industry to create jobs. There are nearly one crore new youth who enter the job market every year. Against this figure, the total new jobs created last year was less than one and a half lakhs. The scenario doesn't look promising in the near future too. Even as the demonetisation exercise is underway, we have a discussion starting on giving a basic income to all. Indians will all get a minimum salary from the government. The Union budget this year might even kick-start this activity. The sum being discussed is roughly a 1000 rupees a month per person. One view is that this will be given to all citizens regardless of their wealth status. The other view is that only those below the poverty line would get paid.
There are some who argue that this should be given only to the rural poor. If all Indians are paid at the poverty line which is Rs 1090 per capita per year, then the total sum would be nearly 18 lakh crores or 12% of the GDP. If half of this amount is paid, then the government will be spending nearly 5.2% of the GDP. This will be equal to all the subsidies paid by the central and the state governments by way of health, education, electricity, gas, sugar, transportation, railways, kerosene and water.
The big question is whether such a major withdrawal of the government from providing basic services can ever be attempted.The debate has started, and it will be interesting to see how it goes. Finland has started giving a basic income to 2000 of its citizens. Switzerland might start this activity soon. The Economic Survey slated to be launch later this month is going to discuss this issue in detail. We would need some serious thought in this, not only from economists. What would be the social impact of such a scheme? Will the Prime Minister wait for all constituents to discuss this and come up with a smooth implementation plan? Or will he decide to launch this as a surprise move yet again?
If only the poor are paid, the total sum would come to about 3.5 lakh rupees. If this method is chosen and implemented, then it could mean the cancelation of all other income transfer schemes. With this, the Union budget does not get impacted. At the moment, the government spends about 50,000 crores on the MNREGA and about 2 lakh crores on the Public Distribution System. Will the government drop these schemes after bringing in the UBI? If it does so, then the cash transfer will reach to the poor and the large amounts of administrative costs involved and leakages tolerated will be saved. The private sector is not investing to expand capacity, consumption demand is not picking up and the world economy is not encouraging a recovery in exports. On top of all this, there is a fear that automation is going to make new job growth even more difficult.
Across the world, a large number of jobs are being done by intelligent machines and robots. That is why the concept of a Universal Basic Income is coming up in policy debates across the world, guaranteeing a minimum wage to all. Unemployment creates various problems. The latest manifestation of this has been the huge protests in favour of Jallikattu in Tamil Nadu. An age old sport that is said to cause great pain and misery to bulls has been banned. However, there has been a severe backlash against the ban, with thousands of youth protesting on the street and urging the government to call off the ban. The huge crowds of protestors has baffled everyone, just as the protests for reservation over the last couple of years.
Youth belonging to the better off communities of Jats in Haryana, Patels in Gujarat and Gujjars in Rajasthan have been demanding caste based reservation. These upper castes now want to be moved into the backward castes lists as they face a situation where their traditional farming occupation is no longer remunerative and jobs in the formal market are few and far between. The perception therefore is that people belonging to lower castes are getting hold of the few jobs that come about. Large scale protests are then the only way to urge the government to expand the lists of backward castes.
A basic income will provide the means for the jobless to lead a simple life without being deprived of essential food and clothing. There are two major questions that emerge from this concern. Who is going to benefit from this scheme? Should it a be Universal Measure that gives a basic income to all citizens and residents? Or should it be restricted to the unemployed and the poor? If it is not Universal, the old problem with targeting will surface and only those who are visible and articulate will be benefitted leaving the actual poor unattended.
Nearly fifty percent of primary enrolment in school is still within the government system, and at least a fourth of health care is still provided by a state run health care apparatus, however inefficient and rusty. A sudden withdrawal might be catastrophic. While a billion people are enrolled in the Aadhaar scheme, there are 300 million who still do not have identification. Also, with at least half the population still not included in the formal banking system, a Universal income scheme might have to wait longer. The challenges in this drastic transformation are also formidable. A large number of subsidies and transfers are done by state governments. The center and state must be able to coordinate and together withdraw their schemes to be able to replace them with one Income transfer scheme. Also the complete withdrawal of the government from the food market will result in quite a shake up of the agriculture market leading to major upheavals for famers who are already facing a large burden.