Thread by @HardFastAndFree

Dear @tanvishukla, may I please ask you why you Indians think of the most impractical economic ideas?

Did you seriously think through this idea before bringing it up for debate?!?

So what is #UniversalBasicIncome? I shall address the same in this thread.

https://twitter.com/MirrorNow/status/1084859546462502913

UBI is nothing but the idea that every citizen, employed or unemployed, working or retired, receives some minimum money from the govt in order to meet expenses.

Sounds good, right? But it's impractical. How? I shall explain the same here.

With some information in hand.

A few weeks back, I already explained why the Nordic "socialist" model won't work in countries like India.

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.

https://twitter.com/HardFastAndFree/status/1078039329325436930

Consider this:

1. Per capita GDP: The average Indian earns $2,000 per year.
tradingeconomics.com/india/gdp-per-…
2. The global BPL is almost 50,000 Rupees or $700 per year, i.e., $1.90 per day.
en.wikipedia.org/wiki/Below_Pov…
For India, it's 11,680 Rupees in rural and 17,155 Rupees in urban areas.

3. What is the rate of unemployment in India today? See these tweets:

https://twitter.com/sonaliranade/status/1084783285757140992

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?

Roughly 29 million will find a job. The remaining 40 million will be jobless.

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.

So senior citizens will have to rely on pensions from the govt.

Assuming 65% of India is below 35.

For more details, refer to this:
statista.com/statistics/271…

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.

But among the 66.23%, remember only 42% will get jobs today.

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....

This 27.82% will have to be taxed for it.

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.

Roughly $242-$243 per year, taxes on the 27.82 will be roughly $17.54 billion.

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.

2. If people find living off the govt easier than going to work, and more people start depending on the govt, this scheme will fail.

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....

4. Like educating their kids, paying rents, buying houses and vehicles, etc., and everyday expenses. If they keep paying taxes, they will be reduced to starvation levels of existence.

5. UBI will cost much more than my preliminary skeletal calculation. For it to remain....

5. affordable to India, it will have to be extremely low.

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.

Here's the paradox:

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.

3. India is not a mono-ethnic nation. Assuming UBI for UP/Bihar will be much lower than Karnataka/Tamil Nadu, what will happen? Lazy bums and criminals (not all UP/Bihar people) will migrate en masse to the latter, adding further strain on the latter's economies and societies.

4. More on #2/#3: UBI will vary for each state, district, city/town, locality, heck even person. How will the govt identify that effectively?

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.

Here are a few reasons why UBI will fail.

1. It will be more expensive than the already existing programs of New Delhi. Don't believe me? See this:
independent.org/pdf/tir/tir_19…

UBI could cost the US govt $2 trillion, more than double its present welfare schemes. Same for India.

2. In India's case, the govt can't afford UBI for all so people who enter the workforce would automatically stop receiving UBI. But what if their income is lower than the UBI (not my estimated BPL level) they received? Will they work or will they prefer UBI?

3. Even if people can earn much more than UBI, if they feel comfortable with free money, would they work? In most cases, no. They would simply take money from the govt and waste their time.

4. Since taxes will be high, what will happen? Businesses will stop investing and leave.

That will create more unemployment and more people will be on the dole. Ultimately it's unsustainable.

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.

6. The most important point: The poor will be hurt the most due to UBI.

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?

But wait, there's already a program in action in Kerala and Tamil Nadu: Employment exchange offices giving money to unemployed people.

UBI is just its turbocharged insane version.

Ultimately it ends up hurting the entire economy. The poor will be the worst hit, as always.

UBI will work for a short time only if:
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.

I hope you @tanvishukla and @MirrorNow read this thread on the Universal Basic Income and refrain from discussing any kind of scheme that involves heavy handed govt intervention in public life.

Just to inform you, UBI has been rejected by both Finland and Switzerland.

This is the end of my thread on the unsustainable nature of Universal Basic Income.

Thank you all for reading.

Good morning. Have a good day.