Concerns and Approaches to the Equitable Economic Growth, Universal Basic Income

INTRODUCTION –

India’s GDP is growing quite well, though there are disputes about whether it grew faster in the present time or in the previous years.

There can be no dispute though that India needs to do much better to improve overall human development, in which it continues to be compared with countries in Sub-Saharan Africa.

Even its poorer sub-continental neighbours are improving health and education faster. Benefits of India’s economic growth must trickle down much faster to people at the bottom of the pyramid: to poorer farmers, landless rural labour, and hundreds of millions of workers living on the edge in low-paying, ‘flexible’ forms of employment with no social security.

Only economic growth won’t help the country unless it is distributed equitably among all the sections of the society and so the prospects of this distribution are to be analysed well. 

Universal Basic Income

GROUND REALITY/CONCERNS (ECONOMIC GROWTH – DISTRIBUTION) –

1) Penetration to health & education –

Many economists are juggling with statistics to prove that the Indian economy is doing quite well, it is providing enough jobs, poverty has reduced a lot, etc. However, even these economists admit that a lot more must be done to improve education and health care, and to address the persistent informality and small scale of enterprises that are providing most of the employment in the country.

  1. Economic Inequality –

Some economists say that inequality does not matter so long as poverty is being reduced. In fact, some even say that inequality is necessary to reduce poverty. So long as the people have bread, why should they complain if the rich are eating more cake, they imply. However, economic inequality does matter because it increases social and political inequalities. Those with more wealth change the rules of the game to protect and increase their wealth and power. Thus, opportunities for progress become unequal. This is why economic inequality must be reduced to create a more just society.

  1. Unfair Trade –

In the present economic system, people at the top can make more profits by driving down prices and wages for people at the bottom. They may then recycle a small portion of their profits back as philanthropy, or corporate social responsibility. Tiny enterprises have very little clout compared with large capitalist enterprises; and individual workers have little power compared with their employers. Therefore, terms of trade remain unfair for small enterprises, and terms of employment unfair for unorganised workers.

SOLUTIONS – 

1) Universal Basic Income –

A) Concept –

Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status. The purpose of the UBI is to prevent or reduce poverty and increase equality among citizens.

Five defining characteristics of basic income:

  1. Periodic: Distributed in regular payments,
  2. Cash payment: Distributed as funds rather than, for example, vouchers for goods or services.
  3. Individual: Each citizen (or adult citizen) receives the payment, rather than each household.
  4. Universal: All citizens receive the payment.
  5. Unconditional: Recipients are not required to demonstrate need or willingness to work.

B) Usefulness for equitable distribution of the benefits of the economic growth – 

  1. The beauty of a ‘universal’ basic income is that it avoids messy political questions about who deserves assistance. It also side-steps the challenge of actually providing the services required: education, health, food, etc. It involves giving people cash and let them buy what they need. So it believes majorly upon distributing the income than the benefits.
  2. Some economists who were proponents of UBI, such as Arvind Subramanian, the former Chief Economic Adviser to the Government, have begun with QUBRI (quasi-universal basic rural income), targeted mainly at poorer people in the rural areas to make UBI financially and politically feasible. 

C) Concerns –

  1. If the cash distributed through the UBI scheme will not provide citizens with good quality and affordable education and health, as neither the government nor the private sector is able or willing to, then this will not solve the basic human development problems that must be solved.
  2. UBI scheme might not remain universal for a longer period of time. First, it will exclude the not-so-poor in rural areas as morally it should. Political questions about who should be included will have to be addressed. Second, it will not cover the masses of urban poor working for low and uncertain wages. Therefore, some other schemes will have to be drawn up for the urban sector, and entitlement and measurement issues will have to be addressed for these schemes too.

2) Cash transfer schemes –

All the schemes, rural and urban, could be cash transfer schemes, which Aadhar and the digitisation of financial services will facilitate. For this solution, technological efficiency, availability of the suitable infrastructure and digital and financial literacy at the grass root level are the major targets to be achieved.

3) Strengthening the institutions of the state –

A simplistic UBI will not solve the fundamental problems of the economy. An unavoidable solution to fix India’s fundamental economic problems is the strengthening of institutions of the state to deliver the services the state must (public safety, justice, and basic education and health), which should be available to all citizens regardless of their ability to pay for them. The institutions of the state must be strengthened also to regulate delivery of services by the private sector and ensure fair competition in the market. The building of state institutions, to deliver and to regulate, will require stronger management, administrative, and political capabilities.

4) Aggregations and unions of small sectors –

The aggregation of the small enterprises into larger associations, cooperatives, and unions can be a better solution for having equitable distribution of the benefits of the economic growth. Aggregations of small producers, and unions of workers, can negotiate for more fair terms and can sustain the competition in the market. This will allow them to provide quality products and services to the customers at the affordable costs.

5) Universal Basic Capital –

A better solution to structural inequality than UBI is Universal Basic Capital (UBC) which has begun to pop up in international policy circles. In this alternative approach, people own the wealth they generate as shareholders of their collective enterprises. Amul, SEWA, Grameen, and others have set the examples. Some economists go further and also propose a ‘dividend’ for all citizens, by providing them a share of initial public offerings on the stock market, especially from companies that use ‘public assets’, such as publicly funded research, or environmental resources.

CONCLUSION –

To conclude, three better solutions to create more equitable growth than the ones on offer are: one, focus on building state capacity beginning with implementation of the recommendations of the Second Administrative Reforms Commission.

Two, strengthen the missing middle-level institutions for aggregation of tiny enterprises and representation of workers. Three, the creativity of economists could be better applied to developing ideas for UBC than UBI.

This way at least on policy level the country may have a better wealth or benefits distribution plans earned out of the economic growth. Implementing the plan with a committed attitude will be an another aspect to be looked upon and strengthen further.

Q. Can Universal Basic Income be a long lasting solution for the inequitable distribution of the benefits of economic growth? Analyse in the context of the Indian Economy. (250 words)

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts