Introduction:

• We know that the idea of a universal basic income (UBI) is gaining ground globally.
• Concept – A UBI requires the government to pay every citizen a fixed amount of money on a regular basis and without any conditionalities.

Why do we need such mechanism? Or Why there is demand for UBI?

• Millions of people remain unemployed and are extremely poor, despite rapid economic growth in the last three decades. (Especially the landless labourers, agricultural workers and marginal farmers)
• Vulenerable groups have not benefited from economic growth. UBI is considered a viable way to reform social security to address the shortcomings that the current system is rife with – targeting and delivery.
• To address the behavioural, design, and implementation downsides in the currently used systems of unemployment and social security benefits.
• It is proposed as a solution to high inequality and job loss caused by increased automation in the developed countries.
• Various welfare schemes have also failed to bring them out of penury.

We also read about Pradhanmantri Kisan Samman Nidhi Yojana (PM-KISAN)

• PM Kisan is a limited version of the UBI launched by the current government.
• It promises ?6,000 per annum to farmers who own less than 2 hectares of land.

However, there are some concerns.

Do you know?

• UBI is neither an antidote to the vagaries of market forces nor a substitute for basic public services, especially health and education.
• There is no need to transfer money to middle- and high-income earners as well as large landowners.
• Institutional credit: Less than 15% of the total borrowing by landless agricultural workers and the figure for marginal and small farmers is only 30%.
• Subsidies for well-off: The benefits of subsidised fertilizers and power are enjoyed largely by big farmers.

The way ahead:

Assured Minimum Income

• An income support of, say, ?15,000 per annum can be a good supplement to their livelihoods.
• Additional income can reduce the incidence of indebtedness among marginal farmers, thereby helping them escape moneylenders and adhatiyas.
• It can go a long way in helping the poor to make ends meet.
• Several studies have shown that even a small income supplement can improve nutrient intake and increase enrolment and school attendance for students coming from poor households.
• In other words, income transfers to the poor will lead to improved health and educational outcomes, which in turn would lead to a more productive workforce.

Transfer the money into the bank accounts of women

• Women tend to spend more of their income on health and the education of children.
• It will help bring a large number of households out of the poverty trap or prevent them from falling into it in the event of exigencies such as illness.

However, an income transfer scheme cannot be a substitute for universal basic services.

• The direct income support to the poor will deliver the benefits mentioned only if it comes on top of public services such as primary health and education.
• In other words, direct transfers should not be at the expense of public services for primary health and education.
• Budgetary allocation for these services should be raised significantly.
• Programmes such as the Mahatma Gandhi Rural Employment Guarantee Scheme should also stay.

How to make income transfer scheme feasible with limited fiscal space?

1. By better targeting, especially through SECC data, Agricultural Census combined with Aadhar:

• Direct income support will have to be restricted to the poorest of poor households.
• Therefore, the Socio-Economic and Caste Census (SECC) 2011 can be used to identify the groups suffering from multidimensional poverty.
• Small and marginal farmers who are missing from the SECC can be identified through Agricultural Census.
• The Aadhaar identity can be used to rule out duplications and update the list of eligible households.

2. By aligning other direct income transfer scheme to it:

• For instance, PM-KISAN Yojana can be aligned to meet a part of the cost.

3. Sharing fiscal space with States:

• The required amount is beyond the Centre’s fiscal capacity at the moment. Therefore, the cost will have to be shared by States.

4. Innovating new ways to improve revenue:

• The tax space can be expanded by reintroducing wealth tax and introducing other innovative tax where tax should not be felt burden to tax payer and at the same time tax collection should be affordable.

Conclusion:

The income transfer scheme is costly. However, the cost of persistent poverty is much higher.