Economic Survey of India 2018, presented today in parliament had a mention of universal basic income. Since last year, government is considering the proposal for a fixed income which will be provided to every citizen of India. UBI may replace subsidies, and all of it will be evenly distributed among every citizen. Irrespective of young or old, rich or poor, adult or children; every citizen will be eligible for a fixed payout. This years economic Survey has forecastes (wishes) that in few years time UBI could become a reality in one or two states in India.
Couple of years back, Switzerland had a referrendum on a similar fixed monthly payout for its citizen. Switzerland rejected this idea in the nationwide poll.
If UBI becomes a reality, how this will impact us?
Definitely, those who are underpriviledged will be the direct beneficiary of such payout. For a hand to mouth day labour; UBI will give him an assurance that even is not able to go to work, there is a stream of income for which he need not work. Such an assurance is a boon for households who are hand to mouth. UBI will not only cover the earning member rather every member in the family.
For a middle class household, UBI will ensure an additional avenue of savings. UBI can help working population to have a higher saving rate to lift the economy. Even, equity market can witness some buoyancy due to more liquid flowing to mutual funds.
For higher class, UBI will be another source of income. A portion of UBI given to a high income individual will simply return back to government in form of income tax. Assuming UBI will not be a tax exempt income.
UBI can also cobtribute towards a higher consumption in the economy. This may prove beneficial for industries.
UBI will have a direct benefit to agriculture sector. Farmers will have some support towards the input cost involved in agriculture. Farm yield will have a significant increase.
Potencial threat of UBI is that assurance of a fixed payout will encourage underpriviledged households to have more children who could get more passive income for family. Since, UBI income can not suffice basic minimum need to raise a child, and in lack of quality education, affordable health care and nutrition; future decades will have higher population with lesser skilled workforce. This will add up burden for future governments to handle this kind of situation. High number of low skilled workforce and higher levels of automation might even give birth to an era of anarchy in future decades if UBI becomes reality. Hence, UBI must have a mechanism to check population explotion which might arise due to it.
More money at disposal could also give rise to the menace of inflation. If inflation will become untameable; UBI will loose it's significance due to a lowered purchasing power. Similarly, UBI policy should be indexed with inflation.
However, if UBI can take care of basic nutrition for an individual this might be a reason for healthier India. At least, death due to hunger could be prevented by UBI. UBI mechanism should ensure that only beneficiary of payout has access to this passive income. No one other that the beneficiary or his family should have access to this income.
Government would need to ensure that registration of birth and death should be in real time. Else, there could be a scenario where dead people will continue receive UBI and parents of new borne are not able to get their infant registered for UBI due to the prevailing corruption and slow mechanism of government machinary. With a transparent vehicle of Aadhar this seems a possibility. Although Aadhar in present time itself is fighting a battle of its own. This is one primary reason that UBI can not be a reality in the next financial year.
We have listed down only few of the possibilities and impact of UBI payouts. At macro economic level, UBI will be very big and important decision which government and NITI aayog should take only after a thorough screening. As a next step we might very soon see a consultation paper from NITI aayog to formulate such policy. Empowerment of general public with a passive income will be a welcomed move in my personal opinion. Indeed, this needs to identify and address every single issue macro and micro economy will face due to it. UBI should not be hurried, but a steady consensus towards it's design should begin.
Comments are welcomed for further discussion on UBI and its pros and cons.