Strong case for a Universal Basic Income in India but is it realistic?
I have blogged about the UBI and read about how India would provide a strong case for its implementation. The rationale for this is the fact that India’s welfare programmes (950 that the central government run) are numerous, inefficiently run and encourage corruption. Add to those the programmes run by each state and you have a bureaucratic nightmare unfolding. However this has been part of Indian society and not so long ago it took businesses 6 months to acquire a permit to import computers. The UBI was raised as an alternative to the inefficiency of welfare handouts and this unconditional cash payment be disbursed not just to the poor but to everyone. In more advanced countries the case for UBI is based on technology making many jobs obsolete and no new jobs being created in their place. Although this is not the case in India and it warrants the UBI for other reasons:
1. UBI is easier to administer than India’s current antipoverty programmes which largely take the form of subsidies paid to sellers of grain, fuel, fertilizer and other essentials. Current programmes are plagued by waste, corruption and abuse. UBI would save 2.07% of GDP.
2. By making everyone eligible, a universal basic income removes the messy task of identifying who is and who isn’t in need of assistance.
3. By paying money directly into bank accounts, it would allow India to do away with the vast administrative machinery currently needed to supply the poor with cheap wheat, rice and other goods.
4. By one estimate, around one-third of the grain set aside for India’s food-welfare program never reached the intended beneficiaries in 2012, the most recent year for which comprehensive data are available. Payments under a giant rural-work program are regularly delayed, leaving families in the lurch.
5. paying a basic income directly into bank accounts would encourage more people to use formal financial services, which would then help banks invest in expanding access to banks and ATMs.
1. households—“especially male members”—may fritter away their basic income on liquor and tobacco
2. India’s underdeveloped financial infrastructure could make it hard for many people to access their entitlements. According to the World Bank, there are only around 20 ATMs for every 100,000 adults in India, compared with 70 in South Africa, 114 in Brazil and 132 in the U.K. Although the government says it has helped open 260 million bank accounts since 2014, one-third of Indian adults remain unbanked.
3. The government paper suggests that 25% of the population should be excluded in order to make it more affordable. However deciding who is poor and who isn’t an easy task especially when over 35% of the richest 1% of Indians benefit from subsidized food to which they are not entitled.
4. There is a risk that a UBI would just supplement the welfare programmes rather than replacing them.
Source: The Economist – Wall Street Journal