Wed, 26 Jun, 2019

Top UK economist makes strong case for Universal Basic Income

Ghatak addresses Goans at ICG Dona Paula

05th April 2019, 03:42 Hrs

the goan I network


At a time when the concept of  Minimum Income Guarantee (MIG) is being hotly debated in India, Prof Maitreesh Ghatak, who is an economist at London School of Economics (LSE), has made a strong case for Universal Basic Income (UBI) for poverty alleviation.  Often people tend to mistakenly believe that MIG and UBI are same concepts. However, the truth is that there is a fundamental difference between these two concepts.   

A MIG scheme is targeted at a specific segment of population. For example, if the government decides to give a certain amount of money to 10% poorest people in India, it would be a MIG scheme because it is targeted at an identifiable set of needy people.  On the other hand, a UBI scheme is for everyone regardless of their income. Under such a scheme, typically, a government decides to give a certain sum to everyone in the population. 

So why is Prof. Ghatak in favour of a UBI scheme and not a MIG scheme? He replied, “Suppose you go for a minimum income guarantee scheme, it would be really tough to identify the poor sections of society. Moreover, the manpower and bureaucracy required to identify the poor sections would make the implementation of the scheme really expensive. This is where I suggest a universal basic income scheme. Under this scheme, the government will decide a sum, which will provide everyone, right from the richest to the poorest. However, there has to be a lot of clarity on funding of such a scheme,” Prof. Ghatak continued.   

He further said that a UBI scheme should be part of a broader tax reform. The idea is a certain amount of money (for example: Rs 3,000 per month) will be deposited in the bank account of everyone in the country, right from a rich industrialist to a poor farmer.  However, tax laws should have provisions (like a cess), which will ensure that you contribute to a UBI scheme if your income is more than a threshold limit. Effectively speaking, a rich person would be a net contributor to a scheme like this. 

On the other hand, a poor person will gain Rs 3,000 per month and will  not have to pay anything because his income is less than a threshold  limit. He would be a net beneficiary of such a scheme.  

Prof. Ghatak said a UBI scheme will be populist, if it is simply  added to the budget without bringing in tax reforms. He also said that  the State shouldn’t walk away from its other responsibilities like  education and health to save money for implementation of UBI. 

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