“The simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income,” Martin Luther King noted in the late 1960s.
Suddenly in the last few months, voices recommending Universal Basic Income (UBI) in India have risen to a crescendo.
The government, in its last phase in an election year, is also looking at populist measures. This non-economic brigade pushing for UBI does not realise that in India, UBI cannot be universal or basic and it certainly cannot be classified as income.
UBI is not a new idea. It has been around since the 1960s and besides activists like Martin Luther King, conservative economists like Milton Friedman have also supported it.
It has been adopted in developed countries, with limited success. It has caught the world’s attention again, as it is being pushed by an influential bunch of hedge fund managers and tech entrepreneurs.
This crowd feels that their companies based on artificial intelligence (AI), automation and robots will take over jobs. For instance, Sam Altman, president of Y Combinator, a successful venture capital fund, has a project to give people free money and see what happens to them over a period of time.
To divert opposition from the masses, UBI should be given by governments, is their argument.
In return, these ‘bleeding hearts’, want unbridled growth for their tech companies. They are looking at the future where there will be fewer jobs for people and a guaranteed basic income will come handy.
Repetitive, manual jobs on shop floors have already been taken over by robots. Now multi-skilled, but also repetitive jobs like driving, face an immediate threat from driverless cars.
Underestimating this change will be wrong, as it is already taking place. What is scarier is that AI, which is based on human neural network, can take over multi-skilled and non-repetitive jobs as well.
Where does the poor or the farmer fit into this narrative? In India, he does not. His occupation is not getting replaced, as it is simply not remunerative enough. He has an earning problem that UBI is expected to solve.
Nobody is against UBI, as it seems a simple way of giving money away to get rid of poverty. Supporters even see it as a way to redistribute wealth and empower groups, whose work doesn’t produce income, like stay-at-home parents.
The argument against UBI is that those who work and pay taxes, will have to support this. There is also the worry that employers will reduce wages and politicians will use it to rationalize closing down existing schemes and institutions. So the question is, where will the money come from?
Taking into account the fiscal resources that the Indian government has, UBI cannot be an income; at best, it can be an allowance.
Of course, UBI also assumes that all other schemes will not be needed. MGNREGA’s Rs 55,000 crore, targeted at farmers, is a direct competition to UBI.
There are several poverty alleviation schemes for the rural poor – the Pradhan Mantri Awas Yojana (Gramin), which provides housing to the rural poor, Integrated Rural Development Programme or the National Maternity Benefit Scheme, National Rural Livelihood Mission and several others.
It would be political suicide to end these schemes during an election year. Therefore, there will be a very little diversion of funds from other schemes.
Most poverty alleviation programmes are for rural areas. Urban poverty alleviation programmes are housing related, where BJP state governments have been successful. So these schemes, too, cannot be shot down.
Hence, the UBI will not cover in entirety, all the poor sections of society and certainly not all citizens.
It will not be classified as household income. It would damage the work culture in society, disturb the social fabric of work-to-earn and not direct energy to any productive purpose.
Another reason why it cannot be classified as income is because of its size or quantum. The government does not have fiscal space to give a very large income on a monthly basis. At the most it can be an allowance.
Work provides an identity, ego and even sanity and income is the reward for work. If this relationship is broken, as it was in MGNREGA, it would create challenges for the society.
Approximately 66 per cent of the total population, estimated at 1.35 billion in 2018 by UN, lives in the rural areas. This is more than 89 million and not all of them can be covered under UBI as not all of them are poor, or under stress. What will be the amount and will it come from the Centre, states or from the central government budget?
Fourteen states in the country pay old age pension of less than Rs 500. The highest bracket of the pension is Rs 2,000 given by small states like Delhi, Goa and Kerala.
If the old age pension (Rs 500-Rs 2,000) is taken as the base for this rural allowance, then simple calculation shows an annual cost of Rs 2,13,600 crore to Rs 53,400 crore. The allowance is comparable on the lower end with MGNREGA, but will Rs 500 be sufficient? It seems not. A farm labourer would take between Rs 400 to Rs 600 per day, which works out to Rs 10,000 to Rs 16,000, assuming there are 25 man days. If the expectation of the allowance is not set right, this is what they will hope from the government.
But if this bhar-pai allowance has to be given, it has to be announced immediately, maybe in the interim budget. More importantly, it has to reach the rural population before the election for the BJP to claim its benefit.