Alternative Policy

Alternative Economic Policy for India

Dr Shobana Nelasco M.A., M.B.A, M.A., M.Phil.,Ph.D.

Development Economist, Fellow, LSE, London

  1. Universal Basic Income is a modest amount of cash given to every citizen of India, by the government, individually, every month, and unconditionally as a matter of right. The policy will certainly build a more equitable society, socially and economically, by ensuring that no one is deprived of the basic necessities of life. ‘People should be trusted to use these resources better than the state. Everyone is the best judge for their expenses’  

2.Emergency Basic Income or Temporary Basic Income (urgent during Pandemic). It is the money to be distributed during Pandemic. ‘Emergency Basic Income or Temporary Basic Income is a minimum guaranteed income above the poverty line, for vulnerable people in 132 developing countries’ proposed by UNDP and many experts during this Pandemic.

Universal Basic Income:

A universal basic income is a government guarantee that each citizen receives a minimum income. It is also called a citizen’s income, guaranteed minimum income, or basic income Emergency Basic Income is one which the economist aim during Pandemic

  1. Hunger and Poverty kills more than Corona:

Pandemic takes away the life of many. But hunger and unemployment kills many silently. In case of migrant labourers, in case of the laborers who have lost their jobs and in case of the dependent population it will help them to sustain themselves alive.

  1. Easy Transfer of Basic Income by the government to People: 

The economy should directly transfer Universal Basic Income into everyone’s account. (during Pandemic to the 33 crore Jan Dhan bank account started under National Mission for Financial Inclusion for the poor people.) The left out people should be identified through their Adhaar card and they should be given money in person through a mobile banking delivery system. Subsequently the government should create a bank account for such people and money should be transferred. The banks should not have the minimum account balance, compulsory credit/ debit cards, collecting money for debit cards etc for such accounts. In future governments should make people start accounts directly with a single government bank for which all ATMs should be permitted to be used for no extra charges. This will save the poor people from the banks which takes away the poor people money without their knowledge. This will save all sorts of leakages due to bribe and administrative expenditure

  1. Pandemic, Hunger, Unemployment and Death

The glaring income inequality has shown its massive miseries during this Covid crisis among the people of developing countries. Lack of income and resultant hunger has resulted in widespread violence and theft during times of crisis. In times of this COVID crisis, due to lockdown many people do not have food for their living. We hear many death stories because of lack of food, in addition to Pandemic. All poor migrant labourers have lost their life. Hence immediately an amount should be transferred to their account. Human Resource is the major power of our country and hence that should be used properly. The Population should be supported to be saved for their future contribution to society. Emergency Basic Income is the solution for this Pandemic Crisis.

Poverty Reduction: UBI ensures minimum basic income to everyone and hence poverty will be directly reduced immediately. The economic survey 2016-17 itself has suggested that ‘Universal Basic Income is a radical and compelling paradigm shift in thinking about both social justice and a productive economy’ 

  1. Safeguard Poor and vulnerable during shocks

UBI will save all poor and vulnerable from severe shocks like Pandemic and Recessions. 

Government’s Responsibility: Any responsible government’s duty is to provide basic necessities like education, health and shelter.So Universal Basic Income is the solution to execute its responsibility.

  1. Unemployment support:

Every individual needs a job for their living. The Indian Constitution and United Nations provides justification for the people’s right to work. But when the government is not able to provide jobs, it should provide money for their living.

  1. Right to Income and Right to Work: 

The Basic Income Distribution is not giving charity to the people, instead it is redistributing the money collected from their own citizens. The United Nations, the Universal Declaration of Human Rights (UDHR) has declared the right to work as the basic duty of a citizen. When a government cannot provide an employment, it should give the income

Article 23 says that Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protect against unemployment.

  1. Gender Empowerment:

 Since all individuals are paid money, all women will also get equal share. India being the most dangerous country for women in the world according to Relueurs, this UBI will give Indian women Financial Independence which will save them from all sorts of harassment.  

  1. Rise in Human Development Index:

Basic Income will directly increase Per Capita Income, Health and Education. Hence it will directly raise the Human Development Index.

129 among 189 countries in the 2019

UBI will bring about a society of  Justice, Peace and Happiness. The value system of the whole society will increase. Poverty and hunger has resulted in crimes, which will be reduced and all such crimes will be stopped. 

  1. Keynesian justification for Basic Income:

When Universal Basic Income is distributed, the purchasing power of the people increases, which in turn raises the effective demand. This will increase employment. According to Keynes, involuntary unemployment can also be removed by raising consumption expenditure and investment expenditure, thereby reaching a new equilibrium. 

The effective demand may be insufficient to achieve full employment due to unemployment and workers without income to produce unsold goods. 

Keynesian macroeconomics solution to a recession is direct increases in government spending that would shift the aggregate demand curve to the right. This basic income will play the role of creating effective demand.

  1. Increase in Velocity of circulation of Money:

Velocity of circulation is the amount of units of money circulated in the economy during a given period of time. Gross Domestic Product (GDP) = Money Supply x Velocity of Circulation. Basic Income will play a major role to increase the velocity of circulation of money. The frequency with which the money moves adds to GDP and when money is given in the hands of the poor people, it will be spent by them. Ultimately it will raise the GDP 

  1. Healthy Inflation: 

Moderate inflation is necessary for the development of any economy. Only when prices are slightly rising, producers will get incentive in the name of profit. Lot of small scale industries will prosper and it will raise the development of every economy. 

  1. No Extra Fiscal Burden:

There is always a question whether this Basic Income is going to burden the treasury and thereby increasing the fiscal deficit. This concept of Basic Income is not raising additional expenditure. It is diverting the money spent for 

  •  Amount spent for Freebies
  • Amount spent for Subsidies
  • Amount earned in Disinvestments
  • Amount spent under Policies
  • Amount spent under Luxury Policies
  • From Warfare to Welfare

Rise in Happiness Index:

Assured Per Capita Income and Standard of living: If UBI is given, there is guaranteed minimum living standard to all individuals who are part of society.

As per the ADB data and WorldBank data supplied by India, the Per Capita income Per year is

GDP Per Capita Current        US$ 2104.14 @(73.5) = Rs1,55,706

GNI Per Capita (Constant 2010)  US $ 2145.8  @(74) = Rs 1,58,789

GNI per capita, PPP (current international $) 6960 (@74 = Rs. 5,15,040

GNI Per Capita(atlas method )  $2130     @(74)             =   Rs 1,57,620

This is annual average per capita income for India and not family income. The monthly income is shown as around 13,000 to Rs 42,920 (GNI Monthly per capita PPP at current rate). If so, the government should provide at least the lowest portion of it to those who have zero income. 

Accountability of Governments for taxpayers:

 The taxpayers pay tax in expectation that the money will be spent for securing the welfare of the deserving. So if the tax payers want their money to be spent for poor people instead of Luxury expenses, they should be listened to. In others it is showing accountability by giving satisfaction to the people who have paid money to the government in the form of their Personal Taxation.

Boost to Agriculture:

Indian agriculture has the history of poverty, suffering and suicides. But Basic Income will save agriculture and agriculturists. Gulati(2018) Thirtha and Siraj in their paper on ‘Supporting Indian Farmers: Price Support or Direct Income/ Investment Support’ in the 357th working paper of the Indian Council for Research on International Economic Relations’ has suggested a national direct income support scheme for farmers in India to be $27.9 billion, if all farmers were given 10,000 rupees per hectare per year.

Percentage of agriculture, forestry, fishing(value added) 16 

Percentage of industry (Value Added) 24.9

Governments Good Intentions: 

With very good intentions, the government spends money on multiple welfare programs to address the problems of unemployment, women welfare, child care, pension, housing support, insurance payment, subsidy, loan etc. Instead if people are given the money directly, it will benefit the people, as they will be able to choose what exactly they’re in need of. Every individual is unique and they are the best judge on how the resource will get them the maximum utility.

Leakages Stopped: UBI implementation will save a lot of money spent on administrative expenses of multiple Policies. Misallocation also will be stopped. In addition bribery of government staff in the name of different Policies can be stopped once for all.   

Redistribution effect:

When inequality intensifies the richer will become richer and poor will become poor. Subsequently poor people die due to poverty and the richer people invest their savings in business, which will lead to prosperity. 

But when the inequality is further intensified and is too heavy as in modern times, the above theory of inequality will not work out. The richer people will soon start investing in highly risky and unproductive investments and shares. They also invest all their savings in other countries, which results in lack of money within the country.  

Instead, if Basic Income is given and money is redistributed among all people in the name of Basic Income. Everybody will get money and everyone will spend and the money will be in circulation. It will not be hoarded. So the GDP in turn will increase.

Maximum Social Advantage and increased Happiness Index:

Government should collect money and spend it to maximize the welfare of people. When taxes are imposed, dis-utility is created and when expenditure is done, utility is created. The theory of Maximum Social Advantage is about  maximizing the economic welfare of the society as a whole. If it has to be maximised it should create maximum utility to taxpayers by adding happiness for departing the amount. If one’s tax money is spent for the benefit of Poor People, the taxpayer will be happy as it is spent for a good cause. The increased social welfare will enhance happiness in the country. 

Positive Outcomes of Emergency basic Income Distribution:

Granting of Emergency Basic Income, will bring out a remarkable positive change in the economy. The distribution of basic income to people has major positive development in developing economies where the economy has still potentialities of employment as per Keynesian theory of effective demand. This Pandemic has generated multitudes of Unemployment and has destroyed the life of many. According to Keynes, involuntary unemployment can also be removed by raising consumption expenditure and investment expenditure, thereby reaching a new equilibrium. 

Scholars support this Universal Basic Income:

Poor should be trusted to use these resources better than the state. These scholars and their educational credentials should be used for the welfare of our poor people irrespective of the Politics. For the time being all the NGOs are considering the whole population as beggars and are distributing food and are publishing for their institutional publicity. Political leaders are distributing food and are taking photographs and videography for their publicity at the cost of an individual’s dignity and status. Our Indian’s People are not beggars. The country has its duty to take care of their citizens. Citizen’s dividend will save the lives of the poor.