COVID 19 has halted the economy for long period its almost 8 months and government is still trying to unlock the cities

Several economists have called on the government to “put money into people’s hands”. Some have even suggested the government to do that literally: through unconditional, regular payments to citizens as part of a universal basic income (UBI).

Universal Basic Income (UBI), a concept that has been under debate in global forums for some years now, briefly defines a distribution structure where every citizen receives a fixed amount of cash regularly from the government.

Versions of the UBI have been implemented in countries like the US (Permanent Fund Dividend (PFD), Alaska, Canada (Mincome), Brazil (Bolsa Familia Program), Finland and Germany amongst others.

Well the question that comes to me is that implementing UBI financially and administrative feasible? And would it even work?

In developed countries UBI is proposed to help people from technology disruption and automation to boost income. As it is conceived notion that technology will take away jobs and government need to step in to help citizen get money in their bank account

But in India, the idea first gained currency as a solution to chronic poverty and government’s failure to effectively target subsidies towards the poor.

There are various issues of implementation of UBI

  1. Exclusion errors can be significantly high, in which case the benefits reach a little few.
  2. India already has revenue deficit and adding up UBI burden which can be 4-8% of GDP can be breaking back of the government
  3. Another criticism of UBI is the unconditional transfer of cash with nothing in return. It is believed that such a transfer would make the recipient lazy and unwilling to work, which would be detrimental to the economy.

But even if states and centres do find the finances, implementation is a challenge. For a start, identifying the poor in India has been a perennial problem. Programmes and subsidies designed for the poor often end up being disproportionately used by the rich.

Moreover, even if the poor are correctly identified, getting money into their hands can be difficult.

These considerable fiscal and administrative challenges could explain why there have been only a handful of UBI experiments across the world.

The idea of a Universal Basic Income is not perfect, it does have flaws. Each country would have to assess the plausibility of its implementation in the context of their abilities. But the decision would have to be taken soon. Of all the things the coronavirus has given us, the least is time.

Categories: blog