Sounds good, right? But it's impractical. How? I shall explain the same here.
With some information in hand.
Why? Big welfare doesn't give incentives for people to work. It tends to make people lazy.
UBI will more or less fail for the very same reasons.
69 million people have no jobs. Only 42% in the working age group are getting jobs.
These variables are enough to do a simple preliminary math calculation.
What is 42% of 69 million?
Remember India doesn't have the economic wit of Australia, Chile or Hong Kong. Indians don't have personal savings accounts in which they deposit 10-15% of their income to use after retirement.
Assuming 65% of India is below 35.
For more details, refer to this:
27.78% of India is below 14.
66.23% is between 15 and 64.
5.99% is above 65.
Let's assume the middle bracket is working.
What does that mean? Only 27.82% will be working.
If we're to compress India's GDP to this 27.82%, it pushes their per capita income to roughly $7,200.
But if all Indians must at least get a minimum income....
Let's peg the minimum income of the remaining 72.18% at rural levels, i.e., 11,680 Rupees, i.e., roughly $165.
So taxes on the 27.82% will be roughly $11.91 billion.
If we're to peg minimum income at urban levels, i.e., 17,155 Rupees.
Which is 5% of the GDP.
But wait, this isn't a small number if you look closer.
1. India also has military expenditures of roughly $50 billion. That and public enterprises and bureaucracies to run.
3. Most people won't pay taxes if they're too high. They'll simply evade taxes. See GST.
4. Already working people will have responsibilities....
5. UBI will cost much more than my preliminary skeletal calculation. For it to remain....
6. Lazy people will start demanding more money from the govt in order to meet their expenses if UBI is very low. This will strain the economy even further.
There could be other unforeseen side effects of this scheme.
1. If UBI is too low, people will starve. They can't work if they're hungry or weak, so UBI will have to be increased to reasonable levels.
2. But if UBI is too high, people will be okay living off the govt. This could ruin people who otherwise go to work.
I just don't see the upsides to this scheme. However I see it, it seems to create more problems, now forget alleviating existing ones.
1. It will be more expensive than the already existing programs of New Delhi. Don't believe me? See this:
UBI could cost the US govt $2 trillion, more than double its present welfare schemes. Same for India.
4. Since taxes will be high, what will happen? Businesses will stop investing and leave.
5. Taxing the rich won't work. They will find their way around high taxes. So the ones who will suffer the most will be the working middle class and also the poor, sadly.
Poor people usually get support from the govt in India in reasonable states in the form of healthcare, education, etc., which would otherwise cost a lot.
How exactly would replacing them with UBI help?
UBI is just its turbocharged insane version.
Ultimately it ends up hurting the entire economy. The poor will be the worst hit, as always.
1. Majority of the people are well off and only the minority is poor.
2. UBI levels are very low.
Ultimately the best recipe for growth and wealth creation is reducing govt involvement except where direly needed. Let markets work.
Thank you all for reading.
Good morning. Have a good day.