Kushan Mitra
The Indian Universal Basic Income, or UBI, is an idea that is now being discussed across the world, with Finland becoming the first large economy to contemplate it. Indeed, Kela, Finland’s social security agency started a pilot programme that would provide 2,000 citizens a basic income of 560 euros every month. This income is in lieu of all other social schemes. What is interesting is that these selected people would retain this income even if they were to find a job.
The scheme has had its advocates and its detractors. The latter are not just fiscally conservative politicians but also the country’s largest labour union whose major arguments are that this would increase the fiscal deficit as well as disincentivise workers from taking on lower-paying jobs. Advocates have argued the exact opposite, saying that the reduction in the inefficient bureaucracy that runs the social security apparatus and the inefficient targeting of schemes would end, thus making the UBI fiscally neutral. Also, because any additional income would be taxed at Finland’s usual income-tax rates, the UBI would possibly encourage people to take up low-paying jobs.
The pilot programme is going to run for 24 months, despite fiscal conservatives who are against the idea and the backing of social liberals who believe that a UBI is needed at a time de-industrialisation has gripped many Western societies.
But in India, the case for an UBI is fundamentally different. When looking at the systemic challenges that this country faces, one number stands out. Our population. At 1,250,000,000, this number is immense and incomprehensible to many economists from the West. Finland’s population is a mere 5.4 million. India also missed the bus that China caught in the 1980s. The rapid economic and industrial development of our large eastern neighbour brought 500 million people out of extreme poverty between 1980 and 2000.
Yet the Chinese economic miracle that was predicated on global trade and China’s cost advantages as a cheap hub for manufacturing, is dissipating. The rise of nationalism and anti-globalisation in once-industrial nations of the West does not bode very well for global trade, nor for India’s hopes of a industrial-led growth boost.
And industry itself is changing; the number of cars produced per employee has shot up over the past three decades even in India. Once upon a time, car companies had hundreds of workers hammer steel sheets into shape and weld into into the form of a car. Today, if you visit a modern car plant, what is shocking is that robots outnumber shop-floor employees. Stamped sheets are welded into place by robots, sent on conveyor belts to paint-shops and only on the final assembly line does one see men and women scurry around.
Yet from three to four cars per employee per year, car companies now produce close to 20, and while this is not a great metric to start with, car companies now have more people in management and marketing roles than on the shop floor. The labour trouble that engulfed parts of southern Haryana a decade ago, has only accelerated the shift towards more increased automation.
To complicate matters, there is our demographic ‘dividend’; a large number of young people entering the workforce every year. In theory, this should give India a huge economic and productivity boost. After all, we talk of our huge numbers of youth as one of India’s biggest advantages.
One does not want to be a party pooper, but the question of just how this country will provide employment to a quarter of a billion people over the next decade or so, assuming that women also enter the workforce in significant numbers (as is happening in the southern States), has not been comprehensively answered by politicians and policymakers alike. While it would be wrong to accuse previous Governments of not looking at the issue at all, it is true that until recently a holistic of this challenge has been combated.
An army of unemployed youth, and given India’s horrible sex-ratio through the female foeticide-ridden 90s, the vast number of unemployed and unmarried youth should be giving politicians the nightmares. Yet, competitive dole schemes is the usual answer to keep the problem at bay for the time being. Various States have implemented schemes that hand out ‘unemployment’ benefits ranging from Rs 1,000-2,500 per month for youth to lay idle and not foment trouble, and potentially make them loyal voters.
But these small sums of money are not going to be sufficient in the long-term. On this front at least, competitive federalism is not the answer. India already has one solution, which should be strengthened – the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). An Universal Basic Income on the lines of the rural employment guarantee scheme, with some potential for employment, must now be considered even for rapidly urbanising parts of India. This will be an immense challenge and given India’s awfully low tax base, it will just add another burden to taxpayers.
But India already has dozens of badly implemented social schemes already burdening the taxpayer, an universal basic income for the masses could potentially give a massive economic boost by distributing wealth in a fairer manner instead of local politicians appropriating money.
India cannot work with pilot projects of 2,000 people; implementing any such national scheme across India would be a task of immense magnitude. However, the Narendra Modi Government has already laid out the groundwork through expanding financial inclusion and the Aadhaar system. While privileged privacy advocates might scream, their lungs out, the fact is that to implement something on the lines of UBI, would need the Aadhaar platform.
However, this is not an overnight project that can be implemented straightaway. While the Economic Survey of India 2016-17 has flagged this idea (though a few policymakers had earlier written about it) and we should think about it, let us all take some time before rolling the proposal out. We have already gone through one haphazard implementation, and we cannot afford another.
