Universal Basic Income (UBI)

A concept that attained some of the limelight as Congress leader Mr. Rahul Gandhi promised to provide Rs. 72000 annually to most deprived 20% of families in India if he comes into power. So, what is this UBI or Universal Basic Income?

Universal Basic Income (UBI)

What is Universal Basic Income?

Universal Basic Income is a guaranteed basic income provided by the government to the people to fulfill their needs regardless of the resources available to them or their employment status. The main aim of UBI is to eradicate poverty.

The concept of UBI is not new and has been around for a while. However, it does not apply to any country. But there are experiments conducted by various countries to find out the effects of UBI on the citizens. The most recent and famous study is conducted by Finland. In 2015, Finland offered a basic income to 2000 of randomly selected unemployed citizens. No conditions were attached to the money given, that is they could use the money as they like.  

The result of this study was published in February 2019, and it said that “Those in the test group experienced significantly fewer problems related to health, stress, and ability to concentrate than those in the control group,” the researchers also wrote. “Those in the test group were also considerably more confident in their future and their ability to influence societal issues than the control group.” However, there was no difference in people’s motivation to find a job.

We could see that these results look promising but what it is not is complete. It was done in a small group of people in a country that is very different from India in a lot of aspects. So, we cannot say that UBI will have a positive impact and eradicate poverty in India based on this study.

Advantages of Universal Basic Income

Fighting the technological unemployment

Studies of around 46 countries showed that there could be a loss of about 400-800 million jobs due to the emergence of automation and AI. Most of India’s manufacturing industry still depends on human labor but what will happen when these businesses grow enough to be able to afford automation, or what will happen if in the future automation will be cheap enough that even small companies can afford it? It will cause widescale unemployment, and hence increase the poverty in India. A guaranteed UBI will prevent this uproar.

Effect on domestic abuse

 Domestic abuse is not uncommon in rural areas of developing countries like India. However, women still live in the violent and unsafe environment as they don’t have the tools required to live on their own. A guaranteed basic income will provide them enough confidence to leave the unsafe environment as now they will be able to manage on their own.

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Supporting the unpaid caregivers

Sometimes there are situations that were unpredictable like a family member that is dependent on you suddenly gets ill. You have to go by their side which leads to you losing your job. Now this will lead to money problem as well. A UBI can come to rescue in situations like this.

Discouraging low wages

 Countries like India where the supply of labor is much higher than the demand, it is not uncommon for employees to offer unfair wages to save a buck. However, UBI will prevent them from doing that. They will have to start paying well, or labor will survive on UBI.

Ending Poverty

Finally, the primary goal of introducing UBI is to end poverty. In India, 269 million people are living below the poverty line. That comes down to 21.9% of the total population of the country. Congress leader promised to provide the UBI to bottom 20% of low-income families in India. If implemented as promised, UBI will be able to eradicate poverty. Given that all the families under scheme receive the money as promised.

Universal Basic Income Disadvantages

Motivation to work

Experts say that the introduction of UBI will have a negative impact on the motivation of the people to work. The unemployed people may also lose the motivation to hone their skill set or try to find a job as money will come anyway.

Cost

In a country like India, if UBI is promised to 20% of the most impoverished families than the population will come to around 300 million. It will take about 4.9% of the GDP to provide the promised UBI to these families as against 5.2% of GDP spent on all 950 central sector and centrally sponsored sub-schemes. So, the government has to consider this as well i.e. if they will be able to handle this kind of cost or not and what will be its effect on the country’s economy.

Inequality

The figures of poverty that is given below are by Tendulkar’s scheme which widely underestimates the poverty line in India and has been set at Rs. 7620 per year. If amount as large as Rs.72000 is provided to most deprived 20% of families than there will be many people that are somehow managing to get by who will also demand this scheme, this can cause a widespread resentment amongst the citizens.

So, will Universal Basic Income it work in India?

So, getting down to the big question, can UBI work in India? There’s no denying the advantages of UBI. The experiments that took place also gave a positive result. UBI if implemented well, it will undoubtedly have an impact on eradicating poverty. However, it is also necessary to teach people how they should spend the money they received. If they invest it poorly, they will become too dependent on the UBI. This will hamper there willing to work.

 Another question arises, i.e., can it be implemented successfully? There is a considerable amount of corruption in the government sector, so money may not reach the families that are promised this income. Congress promised, but they still don’t have a road map for this plan so it will be interesting to see how they go about it if they got the chance.

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