Universal Basic Income UPSC: A Potential Solution to Economic Inequality?

Universal Basic Income (UBI) is a concept that has gained substantial attention worldwide in recent years. With growing economic disparities and the rise of automation, UBI proposes a solution to the challenges faced by society, including poverty, unemployment, and inequality. In the context of the UPSC (Union Public Service Commission) examination, understanding UBI is crucial, as it touches upon multiple areas of General Studies, including Economy, Social Justice, and Governance. This blog aims to provide a comprehensive understanding of UBI, its implications, challenges, and relevance in India, which will aid aspirants in their UPSC preparation.

What is Universal Basic Income?: Important UPSC Question

Universal Basic Income (UBI) refers to the idea of providing all citizens with a fixed sum of money regularly, regardless of their employment status or income level. The concept aims to ensure a basic standard of living for everyone and reduce poverty and inequality. UBI is unconditional, meaning it is given without means of testing or work requirements, and it is provided to all individuals in society.

Important Features of UBI:

• Unconditional: Every citizen receives the payment, regardless of income or employment.
• Regular: The payment is provided on a regular basis, such as monthly or yearly.
• Universal: It applies to everyone in the country, not just a specific group.
• Monetary Transfer: It is a direct cash transfer to individuals, allowing them to use the money as per their needs.

Origin of Universal Basic Income: Key Concept for UPSC

The idea of UBI has been around for centuries, with proponents arguing for its potential to address social justice issues. Historically, thinkers like Thomas Paine, John Stuart Mill, and Milton Friedman advocated for some form of guaranteed income.

In modern times, UBI has been brought to the forefront by economists and political thinkers who see it as a way to adapt to changing economic conditions, particularly in response to automation, technological unemployment, and the gig economy. UBI pilot projects have been tested in various countries, including Finland, Canada, and parts of the United States.

UBI in the Indian Context

In India, UBI has been a topic of discussion for several years, with the idea gaining traction in the 21st century. India faces significant challenges related to poverty, unemployment, and social inequality, making UBI a potential solution. The government has implemented various schemes like the PMGAY (Pradhan Mantri Garib Kalyan Yojana) and Jan Dhan Yojana, which aim to provide financial support to the underprivileged. However, a nationwide UBI has not yet been fully implemented.

UBI vs. Existing Welfare Schemes

India has a vast number of welfare schemes designed to address poverty and inequality, but many suffer from inefficiencies, corruption, and implementation challenges. UBI, if implemented, could streamline the process of poverty alleviation by eliminating intermediaries and ensuring direct cash transfers to citizens.

• Direct Benefits Transfer (DBT): UBI could complement or replace DBT schemes by ensuring a fixed income for all.
• Poverty Alleviation: UBI could directly target poverty by providing a basic income to the poorest sections of society, thus improving their standard of living.

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Economic Rationale Behind UBI

UBI addresses poverty, inequality, and job displacement by providing a fixed income to all citizens. It fosters entrepreneurship, supports workers affected by automation, and improves social outcomes, including health and education, through financial stability.

1. Reduction in Poverty: By providing a fixed income, UBI ensures that no one falls below a certain economic threshold. It directly addresses the issue of poverty by providing an income floor.
2. Job Creation and Entrepreneurship: UBI provides individuals with the financial stability to take risks, such as starting their own business or pursuing creative endeavours, without the fear of losing their livelihood.
3. Automation and Technological Unemployment: With advancements in automation and AI, many traditional jobs are being replaced by machines. UBI offers a safety net for workers whose jobs are at risk, allowing them to transition into new sectors or acquire new skills.
4. Reduction in Inequality: UBI ensures that wealth is distributed more equitably across society, helping to reduce the economic divide between different social classes.
5. Improved Health and Education Outcomes: By providing a stable income, UBI helps individuals invest in their health, education, and well-being, leading to improved social outcomes.

Criticisms and Challenges of Universal Basic Income for UPSC

While Universal Basic Income offers numerous potential benefits, it also faces significant criticisms and challenges:

1. Cost of Implementation: The most significant challenge is the enormous cost of implementing UBI. In India, providing a basic income to the entire Indian population would require a massive increase in government expenditure, which may strain the economy and the public budget.
2. Inflationary Pressures: Critics argue that if UBI is introduced without careful planning, it may lead to inflation. An increase in money supply could push up prices, particularly in essential goods and services, thereby eroding the purchasing power of the basic income.
3. Work Disincentive: Some argue that UBI could reduce the incentive for people to work, particularly in low-wage jobs. If people receive a guaranteed income, they may not be motivated to pursue employment, which could impact overall productivity.
4. Inefficient Use of Funds: There are concerns that UBI may lead to the inefficient use of public funds, as individuals may not always spend the money in ways that contribute to economic growth or welfare.
5. Political and Social Resistance: The implementation of UBI in a country as large and diverse as India would require a significant political consensus and overcoming resistance from various stakeholders, including those who benefit from existing welfare programs.

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UBI: Case Studies Around the World

Several countries have experimented with UBI or similar policies to understand its impact. Let us understand Universal Basic Income for UPSC questions:

1. Finland: Finland conducted a two-year trial from 2017-2018, giving 2,000 unemployed citizens a monthly stipend. The results showed mixed outcomes: while it improved the recipients’ mental well-being and work motivation, it did not significantly increase employment rates.
2. United States: The concept of UBI has been tested in several U.S. cities through pilot programs. In 2021, the city of Stockton, California, launched a program providing USD 500 a month to 125 residents. Early findings suggested improvements in mental health, employment, and financial stability.
3. Kenya: One of the largest ongoing UBI trials is in Kenya, run by the charity GiveDirectly. The long-term study is aimed at understanding the effects of direct cash transfers in a developing country setting, with encouraging results in terms of improved income levels and social well-being.

UBI and the Future of India

For India, the introduction of UBI would need to be carefully designed, considering the country’s large population, diversity, and economic realities. Here are a few considerations that will help you write answers on Universal Basic Income for UPSC:

1. Gradual Rollout: Rather than a blanket nationwide rollout, a phased approach could be adopted, starting with targeted UBI schemes for specific groups such as the elderly, disabled, or unemployed.
2. Revenue Generation: The government could explore new sources of revenue, such as higher taxes on the wealthy, wealth taxes, or a reduction in subsidies that benefit the non-poor.
3. Technological Infrastructure: India has a robust digital infrastructure through initiatives like the Aadhaar and Direct Benefit Transfer (DBT) system, which could make UBI feasible in terms of direct cash transfers.
4. Political Will and Public Support: Any proposal for UBI would require broad political consensus and strong public support. Awareness campaigns and pilot programs would be essential to garner support for such a transformative policy.

Thus, Universal Basic Income presents a potential solution to the pressing issues of poverty, inequality, and unemployment, particularly in the context of India’s growing population and the challenges posed by automation. While it is not a panacea, UBI could play a critical role in ensuring a minimum standard of living for all citizens. For UPSC aspirants, understanding the theory behind UBI, its potential benefits, challenges, and real-world experiments is essential, as it is a topic that cuts across various sectors of governance, economics, and social justice.

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