Universal Basic Income

Issue: Can India Afford Universal Basic Income?

The government is reported to be considering a social security scheme in which it would introduce either a universal basic income or a dole restricted to the most vulnerable.

Can we afford it?

A universal basic income can be afforded only by a highly developed economy where government expenditure already accounts for upwards of 40% of GDP and tax collections are not far behind.

India, with a tax/GDP ratio of less than 17%, is not in a position even to fairly fund basic healthcare and physical infrastructure, besides sovereign functions of defence, internal security, currency and external relations.

Way Ahead:

Universal coverage of benefits must await greater levels of prosperity and internal cohesion.

A dole for the most vulnerable, on the other hand, is both feasible and desirable. More to the point, we already have it. It is called the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA). Its nomenclature is misleading. It is not an employment scheme, but a dole.

Willingness to turn up for doing manual work figures in the scheme as a foolproof self-selection method to make sure that the village landlords also do not end up claiming the benefit.

Setting a wage level that is close to a desirable minimum wage but below it was meant to put upward pressure on rural wages and prevent NREGA work from displacing actual rural wage work.

The task now is to refocus attention on the original NREGA scheme, channelling payments for work done under the scheme to Aadhaar-linked bank or post office accounts.