Universal Basic Income as an Alternative to Existing Benefit System: Results for India from a Microsimulation Approach

Increased public spending in times of sanitary crisis presents a challenge for the budget and calls for more efficient solutions to address poverty and inequality. The study reviews the case for Universal Basic Income and applies a microsimulation model on the latest dataset of India Human Development Survey-II to assess efficiency of the simulated Basic Incomes and the existing programs. The results demonstrate inferior capabilities of Basic Income to combat poverty and inequality compared to the social programs both in budget-neutral settings and within a feasible budget increase. Only one type of Basic Income shows significant results in poverty reduction and performs better than other social schemes: Basic Income that targets the poor. Additionally simulated scenario reveals that a new transfer in the form of Negative Income Tax that brings everyone to the poverty line is able to completely eradicate poverty and decrease inequality in a budget-neutral setting. Adoption of the new forms of social transfers aims to provide security to the most vulnerable part of the population contributing to a more equal and redistributive society