The Cost Benefit Ratio of Universal Basic Income: India’s Dream to Close the Poverty Gap

India is one of the fastest growing economies, with not only a large population, but also a serious poverty issue. According to The World Bank, in 2009 India’s poverty rate hit a high of 31%!  Although it has decreased since then, the poverty rate is still quite significantly high. Generally most approaches to decrease poverty are rarely sufficient and cannot produce any significantly transformational results. Since India has evidently struggled to close the poverty gap, recently reports from the Indian government have expressed interest in creating a universal basic income.

Universal basic income is an extremely uncommon approach that in theory distributes cash money among the population. The Indian governments economic chief advisor Arvind Subramanian drafted the policy approach in conclusion of an annual survey. Although the blueprint of the potential policy is merely just an abstract outline, it’s a start. The components of the policy begin with the proposed amount that will be distributed annually. This number is approximated at about 7,620 rupees a year, which is $113 USD. According to The Economist, this amount is equivalent to less than a months pay at the minimum wage in some of India’s cities. However, it is expected to cut current poverty from 22% to less than .5%. Chief Subramanian even reported how the country plans to pay. What an amazing jump that would be for India, but is it realistic? What are the pros and cons?

Clearly the greatest pro in implementing the UBI is that poverty would decrease substantially… well in theory. Although the intent of the UBI is to benefit the poor, the conditions of the policy would be that everyone (even the rich billionaires) would receive this money. This is because the government would be paying for the policy through recycling funds from about 950 existing welfare schemes. This seems like a valid idea however; the rich and middle class would therefore be benefiting off of the welfare that they don’t need or currently receive. On top of that, Chief Subramanian announced that there would be a limit to the distribution, which in reality only 75% of the population would receive this money. This means the government would somehow need to decide who those people are (which seems obvious), or hope that the rich would be willing to opt out.

Another problem that has been spotted is the physical distribution of cash. First, if someone is living in poverty, there is almost no chance they have a bank account. Second, if one was created, there would be almost a non-existent chance that a bank would be in a close vicinity. Knowing the hardships of implementing and managing the system, Chief Subramanian has more than the most part solved this potential issue.

Implementing UBI could potentially be a policy game changer in India. Although the idea is floating around, it is only merely an abstract outline with no in the near future execution. Hopefully the fast-growing country will soon find a way to close the poverty gap.


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