Basic income – Merits and Demerits

What is Basic Income?

• A basic income is also called unconditional basic income, Citizen's Income, basic income guarantee, universal basic income or universal demogrant.
• It is a form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

What are the merits?

• Economists are advocating universal basic incomes for fighting inequality, slow wage growth, advancing automation and fears that immigrants will take away jobs.
• While free trade and technological advances have grown national incomes, not every individual is better off.
• There are winners and losers. Redistributive government intervention is needed so that no one is left worse off.

Pilot project in India:

The ‘transformative’ potential of guaranteed unconditional incomes was demonstrated in Madhya Pradesh back in 2014, in a pilot project. The income supplements given amounted to less than a third of monthly expenditure for families living at the poverty line.

What are the lessons from the pilot project?

• One, nutrition intake rose. Specifically, consumption of pulses, fresh vegetables and meat was up 1,000%, 888% and 600% respectively.
• As a result, incidence of illness dropped. Enrolment and attendance, especially among female students, in schools improved.
• Two, it resulted in more equitable development.
• On receiving the payments, marginalised individuals began exercising agency within their households and the community.
• Three, there were also economic spin-offs as villagers worked harder than before, with a number of adults engaging in two economic activities (own-account farming with small business on the side).
• Four, indebtedness decreased as the propensity to save increased over the pilot period.
• The results dispel doubts such as whether ungrateful welfare abusers will buy alcohol with their new-found income, if welfare payments are dignity-destroying and other such apprehensions often expressed as ‘don’t just give them fish; teach them how to fish’.
• To those too weak, unwell or challenged physically to pick up skills and take up jobs, guaranteed incomes provide a safety net.
• Where people are skilled and employed, but receive low wages, as seen in the case of handloom weavers or in small enterprises, basic incomes can supplement earnings and support welfare.

What is the feasibility of Basic income in India?

• A new universal basic income for all Indians won’t be affordable unless it replaces the whole multitude of programmes and subsidies  currently in place.
• That would rid the welfare system of all existing overlaps and gaps, but the simplicity will extract huge political capital.
• A basic income scheme will be administratively easier and cleaner than National rural employment guarantee scheme and putting money into select Aadhaar- seeded Jan-Dhan bank accounts ought to be relatively simple.
• If the basic income is introduced in addition to the two statutory income transfer schemes for food and wage jobs already in place, the government’s deficit will increase.
• Both will have to be reformed if the plan is to guarantee all three: food, basic income and wage jobs.
• For basic income to be more feasible it should be targeted at the most deprived, using the socio-economic sensus.
• Creating sustainable funding sources for it, whether by way of new taxes or by streamlining entrenched subsidies and incentives, will still be a challenge.

Category: Mains | GS - III | Economics

Source: The Hindu