International Business

Assignment

Analysis on article
“UBI Can Help Tackle Poverty”

Submitted to
Prof. R Sugant

Submitted by: Group No. 8

Monisha K M 17119
Vishnu Chaudhary 17144
Basappa Sagar K S 17105
Ruchith Murkya 17131
Shouhit Dehariya 17148
Athul Kashyap T 17104

Batch: 2017-19

23/01/2018
Contents
1. What is Universal Basic Model (UBI)?.................................................................................1
2. What are the advantages and disadvantages of UBI?............................................................2
3. What are the challenges in implementing UBI in India?.......................................................4
4. Can UBI be implemented in India? Why do you think so?...................................................5
1. What is Universal Basic Model (UBI)?
Universal Basic Income (UBI) is a model for giving all natives of a nation or other geographic
region with a given total of cash, paying little mind to their pay, assets or business status. The
motivation behind the UBI is to avoid or diminish poverty and increment uniformity among
residents.

UBI is additionally referred to just as essential salary. As per the support amass Basic Income
Earth Network (BIEN), the fundamental guideline behind essential wage is the possibility that
all natives are qualified for a reasonable salary, regardless of whether they add to creation and
notwithstanding the specific conditions into which they are conceived.

BIEN records the accompanying five characterizing qualities of basic income:

 Periodic: Distributed in general installments,

 Cash Payment: Distributed as assets instead of, for instance, vouchers for products or
administrations.
 Individual: Each native (or grown-up subject) gets the installment, instead of every
family unit.
 Universal: All natives get the installment.
 Unconditional: Recipients are not required to show need or ability to work.

In the most well-known UBI execution, indistinguishable occasional installments are made to
all people and the expense framework guarantees that assets are come back to the framework
from those with higher wages. For the most part, the sum is measured for subsistence: enough
to deal with the person's fundamental needs yet insufficient to give a ton of ruffles.

UBI is one case of an ensured salary show. The fundamental elective model is a Guarantee
minimum Income (GMI) framework, some of the time called an Basic Income Guarantee
(BIG), which includes shifting needs-based supplements intended to guarantee that all
nationals have enough to live on. In that framework, just low-wage people get installments.

As of late, UBI has been in the news as one path proposed to help a workforce dislodged via
mechanization. Musk, Zuckerberg and numerous others trust that robots and AI-improved
programming may supplant most human work in an imminent future situation once in a while
called the robot economy

Pundits of ensured wage contend that it would be excessively costly, making it impossible to
execute and would make a disincentive to work. Advocates, then again, trust that it could be
less expensive over the long haul, thinking about the impacts of destitution, and that, besides,
it would advance innovativeness and enterprise among those liberated from the battle to
survive.

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2. What are the advantages and disadvantages of UBI?
Below are the lists of the advantages and disadvantages of UBI (referred as per the economic
survey of India 2016-17), but it tends to lean towards the idea and rationalize most of the
drawbacks.

Pros:

 Increased efficiency in governance: Reduces the confusion among the citizens

regarding many rules and schemes available for common people. Government
can deliver the benefits easily as it is delivered through bank accounts to the
beneficiaries

 Contribution towards reducing the poverty: At a UBI of 4200 per person

annually, the poverty rate as per current definition will reduce to 1.42%. The
expenditure of 4200 per person under UBI would be same as the money spent on
all welfare schemes as of now

 Financial inclusion: Since all individuals will use their bank account to access
the money, the inclusion of un-banked people into the banking sector will lead to
financial inclusion

 Women empowerment: India’s women below poverty line suffer more than
men. An income in their bank account will ensure that they have a greater say in
family affairs and get better nutrition

 Psychological benefits: UBI will unburden the poor from task of finding work
for daily survival and help them to improve socio economic indicators like
health, literacy and education.

According to The World Development Report (2015), individuals living in poverty have a
preoccupation with daily hassles and this results in:

a) A depletion of cognitive resources required for important decisions

b) Low self-image that tends to blunt aspirations
c) Norms that may require investments in social capital to the detriment of private
opportunities.

Cons:

 Cost to the tax payer: Currently, the money spent on all centrally sponsored
schemes comes up to 5.2% of the GDP. However, the cost of UBI will be higher
than the amount and also, it will increase annually due to inflation. Finding the
optimum level of UBI will be a major challenge.

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 [Source: Economic Survey 2016–17]

 Inflation: The purchasing power of the rupee reduces due to inflation. Hence,
the government will have to adjust the UBI from time to time. In case the growth
of the economy is not catching up with inflation, this could lead to financial
disaster.
 Possibility of reduction in labour supply: With an assured basic income, there
might be drastic reduction of voluntary labor. This may also lead to rise in cost of
labor , hurting India’s advantage as a country with cheap labor

 Access to banks: A large majority of Indians are still not using the banking
services regularly. Though Jan Dhan Yojana and post office bank have increased
the coverage, rural areas might not be able to absorb the new concept.

 Rise in consumption of temptation goods: The universal basic income concept

is useful in eliminating all subsidies including PDS. However, there is a
possibility of people spending this money on temptation goods like cigarettes
and alcohol instead of nutritious food.

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3. What are the challenges in implementing UBI in India?
There are around 950 focal segment and halfway supported plans in India, which record to
around 5% of the GDP spending plan, yet at the same time vast extent of the populace in
India still lives underneath the neediness line, this is because of the way that there are
spillages in the framework, and regularly, individuals who really require government bolster
are forgotten. In this manner, it is contended that Universal Basic Income will conquer these
issues by giving a fundamental wage to all natives.

Lifting individuals out of neediness has dependably been a need for the province yet
regardless of significant advance, India has not possessed the capacity to achieve wanted
outcomes, and however, the genuine inquiry is: Is Universal Basic Income the most ideal
approach to kill destitution in India? There are solid monetary and political reasons why India
can't select Universal Basic Income, at any rate in the current conditions.

Initially, the greatest issue is that India doesn't have the monetary ability to execute Universal
Basic Income, It is frequently accepted that assets can be raised by supporting appropriations
and catching a piece of the income done without by virtue of different assessment exclusions,
incorporating into the individual wage charge. These may not occur. The income sworn off by
and large is optical and the aftereffect of poor outline. Regardless, a piece of it is currently
out of the framework with the execution of the products and enterprises charge. Further,
politically, it will be amazingly hard to move back sponsorships with a specific end goal to
make financial space for Universal Basic Income. It is constantly prudent for the legislature
to chip away at decreasing non-justify endowments, however the additions ought to be
utilized to build capital spending, which help support development in the medium-to-long
will haul.

Second, Universal Basic Income can make twists in the work showcase. A consistent, lasting
and ensured salary with no work is probably going to influence work portability and
cooperation. It is likewise liable to expand compensation, as has been seen after the execution
of the Mahatma Gandhi National Rural Employment Guarantee Act. Higher wages without a
comparable increment in efficiency will influence India's aggressiveness. This could likewise
have longer-term suggestions as far as higher expansion and lower development. The
mutilations in the work market will, obviously, rely upon the measure of Universal Basic
Income.

Third, the nature of Indian governmental issues can make difficulties. It is exceedingly likely
that political gatherings, keeping in mind the end goal to enhance their odds in decisions,
would need to expand the measure of Universal Basic Income or attempt to bring back
sponsorships in some frame or the other, which will have financial ramifications.
Undoubtedly, India still needs to demonstrate that it can really run adjusted spending plans
for an expanded period. The political class dependably has this compulsion to pronounce
untimely triumphs and give away financial increases.

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What India needs isn't Universal Basic Income. It needs defense of appropriations, better
focusing on and operational effectiveness. It needs to move to money exchanges at a
quickened pace with the utilization of Jan-Dhan, Aadhaar and versatile. This will help
diminish expenses and extra assets for capital spending to enlarge development. As history
has appeared, the most ideal approach to haul individuals out of destitution is managed higher
development. In this manner, as opposed to making lasting doles like Universal Basic Income
for the whole populace, which will be difficult to invert later on, the thought ought to be to
spare expenses with better focusing on. This will help make the important conditions for
higher development which will conclusively lift individuals out of destitution.

4. Can UBI be implemented in India? Why do you think so?

Countries like Sweden and Switzerland have tried to implement UBI. Their implementation
was based on handing out a monthly cash handout to everyone, irrespective to their
employment status. The reason for this type of UBI is not really to provide an income for the
unemployed or unemployable. These countries have reached the limits of consumption. They
have a huge GDP PPP. The citizen has reached their limit of consumption. This type of
handout is to egg people to consume more, which leads to growth of their GDP.
If you want to implement UBI in a country like India, it will be very expensive because we
do not have that kind of revenues even if you selectively apply it. Ultimately it is the affluent
who support the jobless. The burden on the affluent will be huge in India.
There can be other ways to achieve the same though. For example, providing free housing
and food security achieves UBI in many ways. We need to spend more in health and
education too.

Why doesn’t the idea of a universal basic income work in India-?

Population and Demographics:
The current population in India is 1.311 billion. Deciding basic income for a population for
such a diverse and large society is a mind boggling task in itself. The logistics itself would be
overwhelming the effort and intention. Depending on where an individual stays and the level
of development in the state, the basic income will change - how frequently? No one can
comprehend. How have 29 states and 7 union territories grown individually and the nation
grown wholly in a year determines the prices of commodities, but cannot alone set the basic
income. The standard of living of every individual will not grow in the same way; it may
degrade too. Thus, putting a cap on it - in such a diverse condition, is something the
government would not want to take up, right now. The rate of increase in the basic income
cannot be determined, substantially, if the idea is to impact Indian households.

Poverty and Unemployment:

The first factor in deciding the basic income is poverty and the second is unemployment.
Both are terribly large and powerful issues. There are two issues that will be particularly
looked at - a) How long will the poor benefit from this and will their standard of living
increase? And b) if the unemployed continue to receive basic income, will they go and find

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employment and if the irregular earners receive this income, will they try to stabilize their
employment? The point with the basic income regarding these two is that each set their own
benchmarks on the basic income. Just like tax slabs - we will need to have income slabs to
implement this policy at such a large scale. With each of them having their own say, it
becomes impossible to ascertain the combined effect of both and thus set a single benchmark
income for all conditions.

Affordability to essential services:

Medicine, water and basic nutrition: The first problem with our essential services is their
affordability and their accessibility. Basic income is understood on the premise that all the
basic necessities in case of emergencies are accessible and the income is only to get them to
use. TOTALLY WRONG IN INDIA. Healthcare services in India are not fully up to the
mark. Government hospitals are in their dilapidated prime. No scope at all in them, today.
The charges levied by private hospitals on people burn a hole in their pockets. With the state
healthcare system in such a state, basic income is a farce to many eyes. Water is something
we never get properly. The lower middle class and the lower class are the biggest sufferers of
this. Lack of proper drinking water facilities is the crime governments are committing, we are
committing - and the cure? We are no way near to it. Do I need to say about food and
malnutrition too?

Politics and Economics:

Each political party, in its term as the government, tries to woo the opposition’s vote bank.
To envisage this and to reach this stage, it does many things, under the aegis of the
constitutional authority it is given. The spree of sops and reforms and then a silence -
followed by elections and the vindictive games they play; all bear a brunt on the state’s
treasury. There is a lot of legislature that has to be done before putting a bill like this on
action. Parties will discuss it only backdoors, but will never implement it. Unnecessarily, the
state is burdened with useless policies and with the thought of basic income - parties will
now buy their votes on basic income. Politics will simply destroy the economics of the state
with the onset of the basic income, with each party using it as a tool to get its vote bank.

Rather than such a policy which bears no credence to its own applicability in India, the
discussion must be on reforming the basic structure of food security, employment, healthcare
and uniform regional development across the nation.