Congress Party President, Rahul Gandhi has promised Universal Basic Income (UBI) if the party comes to power in the next Lok Sabha election. But whether the Congress President has done the maths and an economic survey as to what this would entail by way of public expenditure remains an unanswered question. The UBI is a periodic, unconditional cash transfer to every citizen in the country. The three main features of UBI are (a) it is universal in nature in that it is not targeted (b) it is cash transfer instead of in-kind transfer (c) UBI is unconditional. That means one need not prove his or her unemployment status or socio-economic identity to be eligible for the scheme. .
Currently the government spends its revenue on various subsidies. UBI would mean that government will move away from service delivery and empower citizens to access services through cash transfers. An important feature of the UBI is that it would give individuals freedom to spend the money the way they choose. This would help them choose the kind of work they want to do, rather than forcing them to do unproductive work to meet their daily needs.
UBI is a social security net and an insurance against unemployment and will therefore reduce poverty apart from ensuring equitable distribution of wealth since only the poor will receive the full benefits. Since every individual receives basic income, it promotes efficiency by reducing wastage through government transfers. This would also help in reducing corruption and bureaucratic costs by replacing many of the social sector schemes with UBI.
However, there are several downsides to the UBI. It could make people lazy and dependent on doles. They may opt out of the labour market. If the UBI is funded by higher taxes, especially by the indirect taxes, it will result in inflation. This, in turn, will reduce the purchasing power of the people and lower the value of the amount transferred. The UBI might reduce the availability of workers in some sectors like agriculture. Hence wages in agriculture labour might increase due to non-availability of farm workers. Above all there is no guarantee that the additional income will be spent on education, health etc and that the money will be spent instead on alcohol, tobacco, drugs etc. Given India’s huge population the fiscal burden on government would be high. The Economic Survey 2016-17 had noted that once UBI is implemented it will be difficult for the government to wind it up in case of failure.
