UNIVERSAL BASIC INCOME – REPLACEMENT OF FARM LOAN WAIVERS?

about 5 months ago
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The first time ever, farm loan waiver was brought in by Janata Dal Govt in 1990, led by the then PM, VP Singh. The amount was Rs.10,000 crore. And then the gargantuan farm loan waiver was announced by the UPA Govt of Rs.60,000 crore, which helped them win the elections. But it is this UPA waiver and not the VP Singh waiver which set off a very bad precedent of farm loan waivers – politicians are convinced that it’s the only way to win votes.

Banks are still reeling under these various populistic measures, with many in the ICU, getting treated through critical life-saving methods, trying to get the high NPAs in control. As farm loan waivers draws more flak, the UPA has come with one more idea – granting universal basic income (UBI).

At the beginning of this week, Rahul Gandhi announced that his party, if it wins the elections, will guarantee every poor person in India a minimum income. Under this radical and totally harebrained idea, Rahul Gandhi’s promise means very individual, who is poor (do not yet know the definition of “poor”) would be given a fixed amount of cash, no strings attached.

Well, the BJP itself spoke about this in its Economic Survey of 2017, where the ministry of finance had come out in support of a basic income. And with them being in power now, aiming to win again in 2019, speculation is rife that the Govt, tomorrow in the interim Budget might announce a similar basic income scheme.

There are many who feel that this is a fantastic idea and UBI should be encouraged as it will help alleviate poverty, bring in more equality. No country, especially one which has earned the label of currently being the ‘fastest growing economy of the world’ should have poverty where people do not have basic food, clothing and shelter. But to provide the fish ready-to-eat, all cleaned and cooked, without teaching them how to cook; is that a good idea? Will they ever learn to catch?

There are a few reasons why UBI is not a good idea:

1: How do you ensure that the one who gets the UBI is indeed “poor?” In the existing welfare schemes itself, there is no much corruption, how does one identify the “very poor?” And with most of these very poor not even having the BPL ration card, how does the benefit get transferred? And if there is a family of five, does every member get UBI or does the family as a unit?

2: Forget identification of the “very poor,” ideologically, this is simply not right. By giving a person money, for doing nothing, we are talking about rewarding people for staying back home; won’t that lead to more societal decay? If only money is doled out and there is no employment, crime, drugs and other socially destructive outcomes will increase.

3: Working for a living, gives a person a sense of well-being, a status, a sense of respect, a set of skills, friends and networks. When you can get money doing nothing, where does one get all these feelings of well-being? Delinking income and work would be catastrophic.

4: How will the money come for funding this ambitious UBI? Naturally, either tax the middle class some more or cut down on some of the welfare schemes. And that will irk more people and in an election year, cutting down on welfare schemes would be a big no-no. If only money gets doled out and some schemes get stopped, obviously money will get reallocated from welfare schemes to a more generalized transfer; ultimately the amount that goes to the most deserving would be a pittance, while he gets deprived of a scheme which helped him some.

5: Those who are unfortunate and do not have enough to lead a decent and respectful life, we as a society should help. But making them dependents for a lifetime, would that be a step in the right direction?

6: Loan waivers have become a moral hazard, giving farmers an incentive to default, every time a state or central elections nears. What kind of citizens will we create if we merely dole out money?

UBI, as a thought is very noble. But how it will ever work in India, where will the money come for this scheme, how the poor will be identified and ensure it goes to them only; there are too many questions.

Suggestion – scrap the UBI idea and instead get creative minds from India’s vast intelligent pool on how to turn around the cycle of rising inequality, prevent social dislocation; we need to think radically different, very out-of-the-box about how we look at income and work itself. That should be the debate in an election year and not such ideas and mudslinging.

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