Universal basic income. Explained by The Indian statement.


On 17th March 2021, West Bengal’s ruling party Trinamool Congress had released its election manifesto for the 2021 Assembly elections. The TMC promised Universal Basic Income for every family, if elected to power. Rahul Gandhi also promises before the 2019 election,if congress comes to power they would give Rs 6000 to every family.

Universal basic income is a governmental public program for a periodic payment delivered to all citizens of a given population without a work requirement. 

 A basic income can be implemented nationally, regionally, or locally. Full Basic Income called the level is sufficient to meet a person's basic needs ( at or above the poverty line). Partial Basic Income called the less than the amount required for basic needs.
One example of Universal basic income is Alaska’s Permanent Fund, The Permanent Fund Dividend (PFD) is paid to Alaska residents that have lived within the state for a full calendar year (January 1 – December 31), and intend to remain an Alaska resident indefinitely. Alaska gives an average payout of $1,600 annually per resident.

 In 2020, many Western nations provided monthly basic income to their citizens, to help them through the COVID-19 induced lockdown. Right now in the US Congress, another such Bill to provide a basic income to all citizens during the pandemic is under consideration. Recently Chicago (a city in the US) started a test for UBI – by providing a basic income for the neediest families only (not universal).
In Finland, Universal Basic Income was started in 2017. Aimed to tackle automation (artificial intelligence in industries) and resulting unemployment. Came under heavy criticism from American and British media – “free meal always fails.” Critics claimed that “free money would make people lazy,” and that now people will be unwilling to take up paid employment. However, after 4 years of the experiment, statistics showed little to no impact on recipients’ likelihood of undertaking paid employment.

In these last 4 years, Universal Basic Income provided less affluent Finns with a safety net, in case of unemployment or ill health. Making Finland rank 1 in the World Happiness Index for 4 consecutive years. However, Universal Basic Income is not the sole contributor to social safety measures in Finland.

Nordic countries already provide free and quality education, healthcare, unemployment benefits for their citizens, and pensions accommodation for senior citizens. Can be argued that this is what contributes to the high “Happiness” scores of Nordic countries.
In India, the idea of a Universal Basic Income was first officially floated in the Economic Survey 2016-17, By the then Chief Economic Advisor Arvind Subramanian.

 The Economic Survey 2016-17 argued that Universal Basic Income is more in line with Mahatma Gandhi’s school of thought than targeted government welfare schemes.

Arguments in the Economic Survey UBI has three components:

 1. Universality, 

2. Unconditionality, 

3. Agency (by providing support in the form of cash transfers to respect, not dictate, recipients’ choices).

The main goal of UBI is Social Justice, Decent minimum income guaranteed to all. It promotes efficiency by reducing waste in government transfers. Insurance against all shocks, UBI has been embraced both by thinkers of the Left and of the Right. 

Poverty Reduction – UBI is more feasible in a country like India, where it can be pegged at relatively low levels of income but still yield immense welfare gains.

Agency – The poor in India have been treated as objects of government policy. Our current welfare system, even when well-intentioned, assumes that poor people cannot take economic decisions relevant to their lives (indignity upon the poor).

  An unconditional cash transfer treats them as agents, not subjects (in keeping with Gandhi’s ideals). The state is not in the best position to determine which risks should be mitigated and how priorities are to be set.

UBI liberates citizens from paternalistic and clientelistic relationships with the state. Employment – UBI creates flexibility by allowing for individuals to have partial or calibrated engagements with the labor market without fear of losing benefits.

 A guaranteed decent income allows for more non-exploitative bargaining since individuals will no longer be forced to accept any working conditions, just so that they can subsist. 

Administrative Efficiency – Existing welfare schemes in India are riddled with misallocation, leakages, and exclusion of the poor. When the trinity of Jan-Dhan, Aadhaar, and Mobile is fully adopted the time would be ripe for a mode of delivery that is administratively more efficient.

Most of the central sector schemes have been going on for at least 15 years. Failure to make a substantial improvement in India’s HDI and standards of living raises questions on the effectiveness of the schemes.

  Often the schemes do not reach the poor and the neediest families – favors go to the rich due to bureaucratic/political corruption. 
 Under UBI, all individuals are targeted – exclusion error (poor being left out) is zero, though inclusion error (rich gaining access to the scheme) is 60%.

Universal basic income, alone, will not diminish the need to build state capacity. The state will still have to enhance its capacities to provide a whole range of public goods – like healthcare, drinking water, sanitation, etc. UBI is not a substitute for state capacity – it is a way of ensuring that state welfare transfers are more efficient so that the state can concentrate on other public goods.