Critically analyze the feasibility of replacing all social welfare schemes in India with a Universal Basic Income (UBI).
Universal basic scheme promotes a kind of welfare regime in which all citizens (or permanent residents) of a country receive a regular, livable and unconditional sum of money, from the government.
How UBI can be formulated in India
- Estimates by National Institute of Public Finance and Policy suggests that subsidies that mainly go to better-off people (‘non-merit subsidies’) amount to about 5% of GDP. In addition the central budget alone shows ‘revenues foregone’ (primarily tax concessions to companies) coming to about 6% of GDP.
- Even if one-third of these revenues foregone are made available for the purpose of UBI, added to the non-merit subsidies, it comes to 7% of GDP potentially available for UBI, which is a substantial sum, more than twice the total amount currently spent on all anti-poverty programmes.
- The tax-GDP ratio in India is substantially lower than in China, Brazil and some other developing countries. India has zero taxation on agricultural income long-term capital gains in equity markets, and of wealth and inheritance provides numerous opportunities to increase. This will provide avenues for expanding tax base which can be used to fund UBI.
UBI promotes minimum government maximum governance. UBI can also aid in effectively addressing the challenges of leakages and corruption.
But it must be borne in mind that India adopted the concept of welfare state because the barriers are not just economical. The poor and vulnerable face the issues of 3A- Availability, affordability and accessibility, UBI as a standalone initiative cannot emulate the benefits of programmes like ICDS, mid day meal scheme or MNREGA.
The other big challenge in rationalizing the subsidies relates to co-ordination between state and central governments. Any plan to phase out subsidies and tax exemptions (relating to the GST) will require an extraordinary degree of co-operation between the states and the Centre.
UBI in India need not necessarily conform to poverty level. A pilot project on UBI in MP showed that UBI can aid in bringing quality changes in the life of the people. Studies can be conducted on scaling up these models to all India level.