Economy

Universal Basic Income: A look at the global models

V Nivedita Jan 31 | Updated on January 31, 2019 Published on January 31, 2019

With General Elections just months away, poll promises are aplenty. The latest is the Congress promising a minimum income to every poor person.

 

This is not the first time that the concept of Universal Basic Income is being discussed in India. Last year, the then Chief Economic Advisor Arvind Subramanian, said in the Economic Survey: “The UBI is a very new compelling idea. It has a lot of challenges. But, it is an idea whose time is ripe for further deliberation and discussion and not necessary for immediate implementation."

The Economic Survey dedicated a full chapter to UBI, noting that it can reduce poverty to 0.5 per cent at a cost of about 4 per cent to 5 per cent of the GDP, if those in the top 25 per cent income bracket are not included.

But, what is it? In theory, the UBI promises income for all, irrespective of age, wealth, employment status, size of household etc. There are usually no restrictions on how an individual can use their income.

In this backdrop, let's take a look at how other nations are dealing with poverty and the measures adopted to pull people out of poverty.

Global models

Countries such as Canada and Brazil have experimented with or implemented their own models to fix the gaps in their welfare systems. America does not have UBI, but it offers social insurance -- income will be provided if the individual loses his/her job or falls sick. However, the scope of the scheme is limited to those who are below the poverty line or those who are likely to fall below the line if they stop earning.

In January 2017, Finland started a two-year experiment, where the government gave 2,000 unemployed people 560 euros a month with no requirement to gain employment. The participants could use the money however they wanted. They would receive the money even if they got jobs. The government hoped to tackle poverty and unemployment, which was at a 17-year high of 10 per cent in 2015.

However, due to political pressure, the govt introduced various riders to the scheme and has let the scheme end after the expiry of its original timeline. Now, the Finnish government is planning to implement a universal credit system.

Bolsa familia, meaning “family allowance”, is a welfare scheme envisioned by the Brazilian government in 2003 where it provides 70 reals in direct transfers to low-income households. In return, parents would have to get their children vaccinated and keep them in school. The aim was simple: reduce current poverty, and help cut future poverty

by giving better opportunities to children. This scheme is regarded a success story as Brazil has seen a 28 per cent reduction in poverty and in the decade after the introduction of the scheme, the number of people living with less than BRL70 a week had fallen from 8.8 per cent to 3.6 per cent.

This model was replicated in other parts of the world, including New York City and the Philippines.

Indian case

The Centre already runs several social assistance programmes and pensions to benefit the elderly, widows and persons with disabilities. Some of these schemes are the Indira Gandhi National Old Age Pension Scheme, the Indira Gandhi National Widow Pension Scheme, Indira Gandhi National Disability Pension Scheme and the National Family Benefit Scheme.

Several states also have such programmes. One such scheme is Tamil Nadu’s widow pension scheme, named Destitute Widow Pension Scheme. It provides a pension to widows if they meet certain conditions.

Another scheme is the Agriculture Investment Support Scheme or the Rythu Bandhu scheme of Telangana. In this scheme, the state government grants Rs 4,000/- per acre per farmer each season for the purchase of agricultural inputs.

So even as the talk of providing income to the poor is gaining traction, the concept of income support to the poor is not entirely new.

Published on January 31, 2019
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