Universal Basic Income: An

Alternative Strategy of Poverty

Alleviation and Mitigating
Inequalities

Dr. Manish Dev

Dr. Radha Parmar
Dr. Shyam Sundar Singh Chauhan
• Poverty and inequalities of income and wealth are some of the
serious problems of India. These problems have been inherited by
India from more than 200 years of British colonial rule. Several
programmes of poverty alleviation were started right from the start
of planned economic development.
• Simultaneously, policy of subsidy assisted programmes of public
distribution system, supply of fertilizers, water for irrigation,
electricity and petroleum products were adopted as a measure of
financial assistance to the people.Several studies have proved that
subsidies resulted in to the wasteful public expenditure with little
success.
• Dr. Arvind Subramanniyan, Principal Economic Advisor to the
government, presented the concept of Universal Basic Income, in
the Economic Survey 2016-17.
• The Economic Survey 2016-17, claims“Universal Basic Income is a
radical and compelling paradigm shift in thinking about both social
justice and a productive economy. It could be to the twenty first
century what civil and political rights were to the twentieth. It is
premised on the idea that a just society needs to guarantee to each
individual a minimum income which they can count on, and which
provides the necessary material foundation for a life with access to
basic goods and a life of dignity. A universal basic income is, like
many rights, unconditional and universal: it requires that every
person should have a right to a basic income to cover their needs,
just by virtue of being citizens.
• Although, the concept of Universal Basic Income is new to India, but
there are evidences that it has been tried in some developed
countries in the past.
 Conceptual Framework and UBI’s
Rationality
• The basic idea of a UBI is that everybody should be given a basic
minimum income as an entitlement and not as compensation for
work.
• The idea behind Universal Basic Income lies under the following
themes:
Social Justice:
UBI gives an idea of a just and non-exploitative society. From Tom
Paine to John Rawls, nearly every theory of justice has argued that a
society that fails to guarantee a decent minimum income to all citizens
will fail the test of justice.
Poverty Reduction:
UBI is also, paradoxically, more feasible in a country like India, where it
can be pegged at relatively low levels of income but still yield immense
welfare gains.
Agency:
The poor in India have been treated as objects of government policy. .
Almost all the programmes of poverty alleviation have been designed
by the upper echelon of bureaucracy or the policy planners. Basic flaw
of these programmes was their uniformity under which regional
disparities in the availability of the resources and peculiarity of the local
problems were never given a consideration. An unconditional cash
transfer would treat them as agents, not subjects. UBI liberates citizens
from paternalistic and clientelistic relationships with the state. By
taking the individual and not the household as the unit of beneficiary.
Employment:
UBI could also open up new possibilities for labour markets. It creates
flexibility by allowing for individuals to have partial or calibrated
engagements with the labour market without fear of losing benefits. It
allows for more non-exploitative bargaining since individuals will no
longer be forced to accept any working conditions, just so that they can
subsist.
Administrative Efficiency:
In India in particular,the case for UBI has been enhanced because of the
weakness of existing welfare schemes which are riddled with
misallocation, leakages and exclusion of the poor. When the trinity of
Jan-Dhan, Aadhaar and Mobile (popularly referred to as JAM) is fully
adopted the time would be ripe for a mode of delivery that is
administratively more efficient.
While Aadhar is designed to solve the identification problem, it
cannot, on its own, solve the targeting problem. UBI is not a
substitute for state capacity: it is a way of ensuring that state
welfare transfers are more efficient so that the state can
concentrate on other public goods. Every citizen in the country
would be entitled to a periodic payment, regardless of differences in
socio-economic status.From the government side, this would mean
massive shift in the way it spends the revenue that it receives
through taxation. An Universal Basic Income would mean the
government moving away from service delivery and instead simply
providing people with the money to access those services as per
their choices , requirements and priorities.
The basic idea is that everybody should be given a basic
minimum income as entitlement and not as compensation for
work.
The UBI, as it is understood today, has three distinguishing
characteristics:
• UBI is universal and not targeted.
• UBI is a cash transfer scheme in lieu of in kind transfer.
• UBI is unconditional.
 Comparison of UBI with ongoing
schemes
• Economic survey 2016-17 very lucidly presented a comparative
picture of UBI along with other schemes.The whole edifice of UBI
rests on three basic principles i.e. (i) Universality, (ii) Unconditional,
and (iii)Involves direct transfers.
• The Budget proposal for 2016-17 indicates that about 950 central
sector and centrally sponsored sub-schemes in India are being
implemented by the Central Government .Total expenditure on
these schemes is about 5 per cent of the GDP .
• Economic Survey 2016-17 has questioned the effectiveness of the
past and ongoing schemes of poverty alleviation, employment
generation and social development on the basis of misallocation of
funds.
• Until now the schemes have neither been demand driven nor
based on socio-economic and geographical conditions of the
region for which they were proposed. Many districts in Uttar
Pradesh, Bihar, Chhattisgarh, parts of Jharkhand, eastern
Maharashtra, Madhya Pradesh and Karnataka, among others,
account for a large share of the poor but receive a less-than-
equal share of resources.
• Misallocation of funds leads to exclusion of genuine poor
from the programmes targeted for them .
 Potential Cost of UBI
• At present, the average income of the population below the poverty
line is about 80 per cent of TPL. So, an income supplement equal to
20 per cent of TPL, adjusted upwards suitably to compensate poor
people for the subsidy elimination that would finance the
programme, would go a long way towards abolishing extreme
poverty.The requisite cash grant would amount to Rs. 3,500 per
head per year (Rs. 17,500 per family per year) at 2014-15 prices. If the
‘Tendulkar poor’ could be perfectly targeted, the fiscal cost of
bringing them up to the poverty line would be less than 1 per cent of
GDP. Joshi further estimated that UBI would cost 3.5 per cent of
GDP, which would be affordable, given ‘deep fiscal
adjustment’.(Joshi,2016)
 Challenges of Implementation
• Economic Survey 2016-17 assumes in clear terms that if all the
existing social welfare schemes, which exerts the fiscal pressure on
the exchequer, are replaced by the UBI than there will be no extra
burden.
• In terms of data, fiscal space for UBI is visible but in practice there is
no such space because of following reasons:
• It is rather impossible to stop any ongoing programme of social
welfare because of the fear of unpopularity of the elected
government.
• Past experience shows that only the nomenclature of the
programmes of poverty alleviation and employment generation
changed with installation of new government.
• A close nexus has developed among the corrupt politicians,
bureaucrats and mafias who protects each other and share the booty
generated through the misappropriation of government schemes.
 Possible Outcome
• Dr. ArvindSubramaniyan the chief economic advisor, seems
extremely enthusiastic about the positive outcome of the UBI. A
statistical exercise has been presented in the Economic Survey 2016-
17 . It claims that UBI disbursement of Rs.16973 per person at 2016-
17 price can bring down Head Count Poverty Ratio zero per cent. It
will cost 14.40 per cent of GDP . These projections are hypothetical
and based on certain assumptions.
• The real problem lies in its implementation and actual utilization of
cash received by an individual who is more prone to conspicuous
consumption rather than the creation of productive assets which can
be useful in creating the permanent source of income.
 Conclusion
• Universal Basic Income scheme is another borrowed idea from the
west which seems ideal theoretically but is extremely difficult to
implement in the socio-economic and political milieu of India where
populist measures are the norms of each and every political party,
either in the government or in the opposition. the UBI is not feasible
in terms of proper utilization.
• We fully agree with Dr. Arvind Subramaniyan, Chief Economic
Advisor, GoI, that the UBI is apowerful idea whose time even if not
ripe forimplementation is ripe for serious discussion.

Thank You