Sunday, November 03, 2013

Universal Basic Income in India

Every 5 years we have an awakening of our collective consciousness and we are at such a time again. There is not much to praise about what has happened in the country in the last 10 years, but the government has implemented 2 much maligned schemes whatever the motive; MGNREGA and The Right to Food Act. I propose that we scrap these and implement a universal basic income. No discrimination between below/above poverty line; every adult over the age of 18 gets a certain sum of money in his bank account every month. People will complain that it will make people lazy and use the money for alcohol abuse, sure some may, but the point is to have sufficient money for food and board nothing more. Despite the laziness argument, we should as a people be able to take a more positive view of human nature. So the majority of people would still be working. The idea makes other poverty redundant and any incremental social security would be in terms of healthcare and other aspects of well-being. The security would not only eliminate poverty, it would allow workers to ask for better working conditions and improve their quality of life. 

The idea of a guaranteed basic income is not new, philosophers and economists from Keynes to Hayek have considered the thought. Keynes believed that as human productivity increases we will increasingly move towards a "leisure society" where people will have more and more free time. One of the reasons this has not happened is "relative need" i.e. our needs have grown. In the current context, we may not be able to provide everyone with an iphone but we certainly can provide for the basic needs of everyone in the world. The major obstacle to this is the inequality between countries. The Swiss will soon hold a referendum on universal basic income, but the numbers just do not add up for a country like India where productivity has not reached the levels of the developed countries. 

Numbers for India:
  1. Assumption for minimum income: 1000 (poverty line; Tendulkar 2009) 
  2. GDP 2011: 52.44 trillion
  3. Number of people over the age of 18 (2011): 9.2 billion
  4. Expenditure as a %GDP: 17.5%
  5. Expenditure to be cut:
    1. Food Security: 1.3 trillion (FY15 est)
    2. Food Subsidy (PDS): 730 billion (FY11)
    3. Fertilizer Subsidy: 700 billion (FY11)
    4. MGNREGA: 400 billion (FY11)
  6. %financed: 34%

It is definitely not possible to implement this in India at the moment. Considering the defense budget is only about 5% of the GDP, it will take a lot of growth before we can implement something like universal basic income.

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