The idea of a Universal Basic Income (UBI) has been there for long. It has been part of a utopian world rich enough to provide a safety net for every citizen via a fixed monthly income so they also have the freedom to do what they want with their time.
It is therefore not surprising that the UBI idea is now making a comeback in the times of economic distress. With the developed world seeing massive economic destruction in the wake of the coronavirus, there have been calls on governments to protect incomes by giving everyone a minimum living wage. Rarely before have we seen incomes for people and revenues for businesses plummet to zero in so short a time. This is truly an extraordinary moment in history.
What is clear is that governments will have to intervene. With the economy under lockdown and production not happening, businesses face the risk of closure. Layoffs have skyrocketed in the US. In India, millions of migrant workers are in detention centres – caught in no man’s land between their workplaces and villages. The government is seen as saviour and omnipotent.
Poorer developing nations like India do not have the financial muscle to risk printing money at massive scale. The inevitable outcome will be some combination of higher fiscal deficits, higher inflation, currency depreciation and increased future taxes. Many countries have tried such approaches in the past with very bad outcomes.
So, what should India do? Is there a way for developing countries like India to do UBI right? Yes!
Tomorrow: India’s UBI Moment (Part 2)