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A Rethink on Universal Basic Income

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August 07, 2017

What is the issue?

  • The union government in its recent economic survey proposed for a universal basic income.               
  • This is a form of social security in which all citizens of a country receive a regular, unconditional sum of money, independent of any other income.
  • Experts are of an opinion to rationalise on the characteristics of a basic income in India.

What are the considerations in this regard?

  • Form of support - The question is whether to support vulnerable sections in the form of goods and services or as cash.
  • Cash gives the discretion to beneficiaries to spend it any way.
  • On the other hand, provision of services or goods directly to beneficiaries may be directed to achieve certain objectives in terms of nutrition,  health or education.
  • There are concerns of leakages and quality in provision as services.
  • For India, where the State is already providing a whole lot of services, income support as a supplement to existing services would be the best option.
  • Coverage - There is a need to rethink on the universality of the income.
  • The adoption of a universal basic income is bound to be a fiscal burden for a developing country like India.
  • The attempt must be to think in terms of reducing the number of beneficiaries using easily definable criteria.  Some of it could be age, sex, etc.
  • It should however be ensured that strict targeting does not run into complex problems of identification.
  • Level of basic income - If we were to treat the cut-off used to define poverty as the minimum income, then the total fiscal burden would be enormous.
  • Level of concentration of poverty within the poverty line and the poverty line itself could be used to arrive at an optimum basic income level.
  • Support given under the MGNREGA can also be considered in this regard.
  • Financing the scheme - As per experts opinion, the scheme would be feasible if the total expenditure is limited to around 1.5 to 2% of GDP.
  • There are suggestions to rationalise the expenditure in certain areas to make up this cost.  This includes
  1. Exemptions in our tax system.
  2. MGNREGS - as this employment scheme is very similar to the proposed basic income scheme.
  3. Expenditure on fertilizer subsidies.
  4. Higher income groups giving up the supplemental income.
  • Given all these the remainder must come from raising additional revenue.
  • Finally, the central government can seriously review the idea of basic income to making it a supplemental income. 


Source: The Hindu

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