13 Jun 2023 UNIVERSAL BASIC INCOME (UBI)
This article covers “Daily Current Affairs” and the topic details “UBI”. The topic “UBI” has relevance in the Poverty Alleviation section of the UPSC CSE exam.
Relevance:
For Prelims:
What is UBI?
For Mains?
GS 3: Poverty
Benefits of UBI?
Challenges of UBI?
India on UBI?
Why in the news?
Chief Economic Advisor V Anantha Nageswaran said the concept of Universal Basic Income (UBI) was not necessary for India since natural economic growth would take care of the country’s many aspirations.
What is UBI?
Definition: Universal Basic Income refers to an unconditional cash transfer provided to all members of a society, with no conditions attached. It is typically paid on a regular basis, such as monthly or quarterly.
Goal: The primary objective of Universal Basic Income is to alleviate poverty, provide financial security, and ensure a minimum standard of living for all citizens. It is intended to address income inequality and mitigate the potential job displacement caused by technological advancements and automation.
Benefits of UBI?
- Poverty Alleviation: UBI has the potential to significantly reduce poverty rates by providing a guaranteed income floor to all individuals.
- Financial Security: UBI provides a stable and predictable source of income, which can help individuals and families achieve financial security. It acts as a safety net during periods of unemployment, economic downturns, or unexpected life events, reducing financial stress and promoting overall well-being.
- Reduced Income Inequality: UBI addresses income inequality by providing a basic income to all individuals, regardless of their wealth or income level.
- Improved Health and Well-being: UBI has the potential to improve health outcomes by reducing stress, financial insecurity, and the negative impacts of poverty.
- Enhanced Social Mobility: With a guaranteed income, individuals have more freedom to pursue education, training, and entrepreneurship opportunities. Empowerment and Autonomy: UBI gives individuals greater control and autonomy over their lives. It allows them to make choices based on their own priorities and needs, rather than being constrained by financial circumstances.
- Stimulus to Local Economies: UBI can serve as an economic stimulus by increasing consumer spending.
- Simplified and Efficient Welfare System: UBI has the potential to streamline and simplify the existing welfare system, reducing administrative complexity and costs. By replacing or consolidating multiple means-tested programs, UBI can eliminate bureaucracy, reduce stigmatization, and ensure that support reaches all individuals in need.
- Adaptability to Technological Changes: As automation and technological advancements continue to reshape the labor market, UBI provides a safety net for individuals who may face job displacement or struggle to find traditional employment opportunities. It allows people to transition, retrain, or explore new avenues of work without the fear of financial destitution.
- Social Cohesion and Reduced Crime: UBI can contribute to social cohesion by reducing income disparities and addressing systemic poverty. It has the potential to alleviate social tensions and decrease crime rates associated with poverty and desperation.
Challenges of UBI?
- Funding: One of the primary challenges of UBI is determining a sustainable and viable funding mechanism. Providing a regular cash payment to all individuals requires significant financial resources. Funding options, such as higher taxes or redistribution of existing welfare programs, can face resistance from those who may bear a heavier tax burden or rely on current benefits.
- Inflationary Pressures: Critics argue that UBI may contribute to inflationary pressures if it leads to increased consumer spending without corresponding productivity gains. If prices rise in response to the increased purchasing power of individuals, it could reduce the real value of the cash payment and potentially erode its intended benefits.
- Work Incentives: One concern with UBI is that it may discourage workforce participation if individuals have a guaranteed income regardless of employment.
- Implementation and Administration: Implementing a large-scale UBI program requires robust administrative infrastructure to ensure accurate and efficient distribution of payments. Designing an effective system that minimizes errors, prevents fraud, and reaches all eligible individuals can be challenging and may involve significant bureaucratic hurdles.
- Redistributive Implications: UBI’s redistributive nature raises questions about its impact on income distribution and its potential to exacerbate wealth inequalities. Critics argue that providing cash payments to all individuals, regardless of their income or wealth, may benefit higher-income individuals more than those in genuine need, thus perpetuating inequality.
- Political Will and Public Perception: UBI faces varying levels of political support and public perception. Skepticism and resistance can arise from concerns about its cost, the potential for abuse, the impact on work ethic, and the redistribution of resources.
- Regional and Contextual Factors: The feasibility and effectiveness of UBI can be influenced by regional and contextual factors such as the size of the population, economic conditions, and cultural attitudes towards work and welfare. Implementing UBI requires tailoring the policy to fit the specific circumstances of each country or region.
- Long-term Sustainability: Assessing the long-term sustainability of UBI is essential. Changes in demographics, technological advancements, and economic conditions can affect the financial viability and effectiveness of UBI over time. Regular evaluation and adaptation may be necessary to ensure its continued relevance and success.
India on UBI?
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): India has an existing social welfare program called MGNREGA, which guarantees 100 days of employment per year to rural households. Although not a UBI, it shares some similarities in terms of providing income support to individuals.
- SEWA’s UBI Pilot Project: The Self-Employed Women’s Association (SEWA), an Indian trade union, conducted a pilot project on UBI in the state of Madhya Pradesh. From 2011 to 2013, approximately 6,000 participants received a small monthly cash transfer. The project aimed to study the impact of UBI on poverty, women’s empowerment, and overall well-being.
- Economic Survey 2016-17: The Indian government’s Economic Survey for the fiscal year 2016-17 included a chapter on UBI. It outlined the potential benefits and challenges of implementing UBI in India, sparking a national conversation on the topic.
- State-Level Experiments: Some Indian states, such as Sikkim and Telangana, have expressed interest in implementing UBI at the state level. In 2019, Sikkim conducted a pilot project, named the Sikkim Universal Basic Income Experiment (SUBE), providing a monthly cash transfer to selected households. However, it should be noted that these state-level initiatives are not implemented nationwide.
- NITI Aayog’s Report: NITI Aayog, a policy think tank of the Indian government, released a report in 2017 titled “Funding UBI.” The report explored the financial implications and potential funding mechanisms for implementing UBI in India, but it did not lead to immediate policy action.
- Political Discourse: UBI has gained attention in Indian political discourse, with various political parties and leaders discussing its potential as a poverty alleviation measure.
Q.1 Which of the following statements is true regarding Universal Basic Income (UBI)?
1.UBI is a means-tested program that provides financial assistance to only the poorest individuals.
2.UBI has been implemented nationwide in many Countries as a poverty alleviation measure.
3.UBI is primarily funded through a dedicated tax on corporations and high-income individuals.
Select the correct answer using the code below:
(a)1 and 2 only
(b)2 and 3 only
(c)1,2 and 3
(d)None of the above
Answer:(d)
Q.2 Which of the following is not a potential benefit of implementing Universal Basic Income (UBI)?
(a)Reduction of income inequality
(b)Enhancement of social mobility
(c)Increase in workforce productivity
(d)Improvement in overall health and well-being
Answer: (c)
Q.3 Critically analyze the potential of Universal Basic Income (UBI) as a social welfare policy in addressing poverty and inequality in India. Discuss its merits and demerits, and examine the feasibility of implementing UBI in the Indian context. (250 words)
Yojna daily current affairs eng med 13th June 2023
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