UNIVERSAL BASIC INCOME

UNIVERSAL BASIC INCOME

WHY IN NEWS?

The concept of Universal Basic Income (UBI) has gained momentum globally, especially as automation and AI-driven technological advancements have led to jobless growth.

MEANING OF UBI

It is a form of guaranteed income where every citizen or resident of a country is provided with a fixed, unconditional amount of money on a regular basis, regardless of any other income they may earn.

MERITS OF UBI

1. Improved Targeting of the Poor: UBI eliminates exclusion errors, ensuring no poor citizen is left out of welfare benefits. It ensures marginalised communities have access to financial support, improving social equity.
2. Flexibility in Expenditure: Beneficiaries have the freedom to decide how to spend the money based on their needs. ○ This empowers individuals to manage their finances independently, respecting their personal choices.
3. Insurance Against Shocks: UBI serves as a safety net, protecting people from financial shocks like unemployment or health crises. ○ It helps reduce poverty and vulnerability, offering economic security during tough times.
4. Financial Inclusion: UBI can increase access to banking and credit for financially insecure individuals. ○ The use of digital infrastructure (Jan-Dhan, Aadhaar, Mobile) can improve transparency and efficiency.
5. Minimum Standard of Living: UBI ensures basic capabilities like health, education, and a stable income, allowing people to afford better-quality goods.
6. Administrative Efficiency: UBI can streamline government welfare by reducing the complexity of multiple schemes, lowering administrative costs.

DEMERITS OF UBI

1. REDUCTION IN WORK MOTIVATION - UBI might reduce work motivation, as people may rely on guaranteed income and quit their jobs, leading to reduced economic productivity.
2. CONTRIBUTION IN INFLATIONARY PRESSURE - It could contribute to inflationary pressures by increasing overall demand for goods and services without a corresponding rise in supply, leading to higher prices.
3. MISUSE BY MEN - In some households, men may control the spending of UBI, potentially leading to misuse or unequal benefits for women.
4. INEQUALITY FOR WOMEN
5. QUESTIONS ON FAIR USE OF STATE RESOURCES - UBI is universal, meaning even the wealthy receive it, which could lead to objections and concerns about the fair use of state resources.
6. LEADING TO HIGHER PRICES

Universal Basic income: A case study of India

• • A pilot project in Madhya Pradesh between 2011 and 2012 provided basic income to 6,000 Indians, coordinated by the Self-Employed Women’s Association and funded by UNICEF.
  • It includes two studies, in one study, eight villages received a monthly payment of 200 rupees for adults and 100 rupees for each child, which increased to 300 and 150 rupees respectively after a year.
  • In the other study, one tribal village received an income of 300 rupees per adult and 150 rupees per child.
  • Receiving a basic income led to improved sanitation, nutrition, and school attendance.

Universal Basic Income: Expert Views

• Abhijit Banerjee, the Nobel laureate, in his book “Good Economics for Hard Times”, has mentioned about Universal basic income and called it ultra universal basic (UUBI) income because any universal income that governments of poor countries can afford will be ultra basic. He further suggested that the best combination would be a UUBI which everyone can access when they need it, and larger transfers targeted to the very poor and linked to preventive care and children’s education.
• Through the think-tank “Ideas for India”, Debraj Ray proposed that each recipient receive a fixed share of gross domestic product – a “universal basic share (UBS).”UBS is in tune with the GDP of the country so it insulates against the shock of the financial system.
• Former RBI governor, Bimal Jalan said in the year 2018 that India is ready for basic income provision and suggested that basic income must be above poverty line. He also suggested that India can start by reducing subsidies and merging them with the help of digital economy and can-do income transfer easily.
• Because of the “lower poverty threshold” and poor implementation of existing welfare schemes, Pranab Bardhan, an Indian Economist, argued that basic income is more desirable in a poor country like India.

WAY FORWARD & POLICY RECOMMENDATIONS

1. Prioritise Employment Generation: Focus on creating jobs in labour-intensive sectors such as healthcare, education, and rural development, which can generate mass employment.
2. Invest in Skill Development: Implement policies that bridge the skills gap between the workforce and the demands of industries, particularly in light of automation and AI.
3. Strengthen Social Safety Nets: Ensure that existing social safety nets are expanded and made more accessible across regions, helping to reduce inequality and provide financial security.
4. Raise Direct Taxes: Consider raising the direct tax-to-GDP ratio to increase government revenues, which could help fund UBI or other welfare programs.
5. Focus on Existing Safety Nets: Before implementing UBI, it’s important to address the uneven distribution of existing social safety nets across regions.
6. Reassess Industrial Incentive Programs: Review production-linked incentive schemes to ensure they contribute effectively to job creation in key industries