Universal Basic Income

The Basic income or The Universal Demogrant (UD) is a periodic cash payment unconditionally delivered to all residents on an individual basis, without means-test or work requirement. The persistence of poverty and significant leakages in welfare schemes that aim to alleviate it has prompted the idea of UBI.

Benefits

• Potentially comprehensive antidote to poverty -minimum income security would enable individuals to plan their lives better.
• Simpler & easier to administer-could replace 100 odd schemes that govt runs for poverty elimination.
• Equitable & wide safety net
• Open organized credit avenues for poor who currently borrow from unorganized sector.
• In the light of fears of automation and consequent job losses, UBI can guarantee all individuals some income.

Improvement over current subsidy regime:

• Targeted welfare services often excludes a lot of the deserving households from receiving subsidies and it becomes difficult to ascertain who are rightfully entitled to receive such benefits.
• Reduce the burden of the bureaucracy in identifying the deserving beneficiaries.
• Minimize Leakages.

Challenges:

• Inadequate banking network-Inspite of huge success of Jan Dhan Yojana (PMJDY), there are still many who do not have bank accounts hence hampering the delivery of the service.
• It can lead to erosion of purchasing power on account of inflation.
• Fiscal affordability-huge pressure on govt budget (around 5-10% of GDP )
• Reduce the motivation for work and might encourage people to live off assured cash transfers
• Might raise wages due to the decline in the supply of casual labourers

Way forward:

The government should ensure the minimum level of subsistence for all, but only to those who show willingness to work. In such a transition to a universal basic income, the government should not resort to raising additional tax revenue through indirect taxes and cess there on. Thus the idea of a basic income should not be unconditional & a substitute for all existing subsidies rather it should complement the existing ones

By: Harman Sandhu