Is it time for India to introduce a Universal Basic Income?

Because of jobless growth, where output and labour productivity increase without a corresponding rise in employment, many countries have proposed the concept of a universal basic income (UBI). This idea has gained popularity, particularly after the International Labour Organization (ILO) highlighted in its latest World Employment and Social Outlook that the decline in job growth and the rise in inequality are linked to increased automation and the use of artificial intelligence (AI)

Universal Basic Income (UBI)

• What is UBI? Universal Basic Income (UBI) is a socio-economic policy where all citizens receive a regular, unconditional sum of money from the government to fulfil their basic necessity, regardless of their employment status or income. This can be deemed as Basic Safety Net.

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• Semi-UBI: In India we have different forms of UBI like cash transfer schemes for farmers and women. Some states have extended this to unemployed youth as well.
• Need for UBI: Due to lack of income there is a lack of demand in the market leading the companies to produce less which further impacts economic growth. In other words, economic growth is declining.
• • Failure of Capitalist Economy: In capitalist systems, a person is paid for the work done by him/her. But what about the people who don’t have work? This showcases a failure of the capitalist system that it is unable to generate enough employment and incomes.

Social Safety Net

• Income With Dignity: In the 1980s, the World Bank cautioned that many Indians might be left behind and recommended establishing safety nets. This approach was implemented in India in the mid-2000s, granting rights to employment (MGNREGA, 2005), food (National Food Security Act, 2013), education (Right of Children to Free and Compulsory Education Act, 2009), and more. 
• Social Security Safety Net:  Social safety nets are non-contributory transfer programs generally targeted to the poor or those vulnerable to shocks. Similar concept to what is called social assistance in Europe. 
  • Examples include Right to Education (free and compulsory education for every child from the age of six to fourteen years), Right to Work provided through MGNREGA. However some states have stronger social security safety nets as compared to others.
  • Is Social Safety Net Enough: However, simply providing money without work does not confer dignity. Therefore, offering employment is crucial. Otherwise, it could result in societal alienation, creating a divide between those with incomes and those without, with the latter being stigmatised as ‘good for nothing’. 

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Impact of AI and Automation

• Construction Sector: In the past, construction projects would create large-scale employment, but now, with the use of bulldozers and cranes, efficiency has increased while employment has decreased—10 workers are now doing the job that once required hundreds.
• Banking Sector: Although the banking sector has expanded significantly, staff numbers have been reduced by half due to the rise of internet banking and digital innovations.
• Trade Sector: In the trade sector, which is the second-largest employer after agriculture in India, e-commerce has grown rapidly in recent years, often at the expense of local neighbourhood stores as more people prefer to shop online.
  • Although we cannot ignore the job generation due to these e-commerce stores (delivery executives) 
• Low Income Self-Employment: Due to AI and automation people now talk about job-loss growth rather than jobless growth. Displaced individuals are struggling to find employment elsewhere, forcing them to create their own job opportunities. This has led to an increase in self-employment, albeit at very low income levels.
  • Opposition View: If there is uneven income distribution then as per Economic Survey there has been growth in wages.

Should India Be Scared?

• This is a transitioning phase that India is witnessing. Currently there has been skill mismatched i.e. skills are not matched with the new technology. Indians should not be scared as with upcoming new technologies new jobs will also be generated. 

Way Forward

• Investment by Private Sector: India’s Finance Minister and the Chief Economic Adviser have emphasised that private industry should invest more in labour-intensive sectors.
• Work of the Government: Government needs to invest in labour-intensive sectors. In fact the government has reduced the allocation in the labour-intensive sectors such as education and health and in the rural employment guarantee scheme, which generates a lot of employment.
  • Opposition View: Pradhan Mantri Awas Yojana – Rural which was launched in 2016, aiming to provide housing for the poorest segments of society had a huge impact on the overall social safety net at the rural level. This rural housing scheme also generates employment either directly or indirectly and has given a rise in demand in steel, cement, and electrical components sectors.
• Need of Financial Resources: Before implementing UBI the government needs sufficient resources. If the government raises more funds from direct taxes, it is possible to bridge this gap, because India’s direct tax to GDP ratio is only about 6.25%. Many developed countries have a much higher percentage. 
• Strengthening Social Safety Nets: There needs to be a focus on strengthening social safety nets. The government is providing education but what about the quality of education. If the government is providing food security then there is also a presence of hidden hunger and lack of nutritional food.

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Conclusion

The concept of Universal Basic Income (UBI) offers a promising solution to address income inequality and jobless growth in India. However, its implementation requires careful consideration of country’ economic capabilities and social factors as it can create societal alienation among benefactors of UBI.

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