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Universal Basic Income

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  • Last Updated : 29 Sep, 2022
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A legally mandated and equally distributed cash award is provided by the government to all people of a given nation under the socio-political financial transfer policy concept known as the Universal Basic Income (UBI). Local, regional, or national implementation of a basic income are all possible. An unconditional Universal Basic Income is provided under this. By virtue of being a citizen, it demands that everyone have a right to a basic income that will meet their requirements.  As a real and workable answer to India’s poverty and a hope for a robust economy overall, the proposal of a Universal Basic Income garnered significant media attention in 2016 and took up more than 40 pages in the 2016-2017 Economic Survey of India. It is based on the notion that a just or deserving society must guarantee that each individual has access to a minimal amount of income that will allow them to live with dignity and pay for their basic needs. A universal basic income would grant everyone unequal rights. Every person must be guaranteed a basic income that meets their needs just for having national citizenship, according to these rights. In essence, a UBI requires the government to regularly and unconditionally give each citizen a certain amount of money. 

Essential Components of Universal Basic Income:

  • Universality: Its nature is universal.
  • Agency: Payments made on a regular basis, by offering financial assistance to recipients in order to respect their decisions rather than impose them.
  • Unconditional: The cash transfer is not subject to any conditions.

Advantages of Universal Basic Income:

  • Protection Against Shocks: Poor households frequently experience many shocks at once, such as poor health, job loss, or cumulative shocks like crop failure, water-borne illnesses, property loss, and natural catastrophes. A safety net will be created by the UBI income floor against financial, health, and other shocks.
  • Decrease in mental tension: The stress of always securing a minimal standard of living will be lessened by a fixed income.
  • Operational effectiveness: The administrative burden on the state will be reduced if UBI is implemented rather than a plethora of different government programs.
  • More efficiency: Under some conditions, UBI might encourage higher production. For instance, agricultural laborers who formerly worked in other people’s farms for minimal pay can now start farming on their own land. Long-term, this will help decrease the amount of vacant land and increase agricultural productivity.
  • Reducing inequality and poverty: An fair wealth distribution will be the effect of UBI.
  • Choice:  The choice to spend their money whichever they feel is best for their welfare will be up to the citizens. Since UBI adopts a “One Size Does Not Fit All” philosophy.
  • Negotiating power: Having more money will give people more negotiating leverage because they won’t have to accept any unfavorable working circumstances.
  • Targeting: There will be no exclusion because all residents are being targeted.

Disadvantages of Universal Basic Income:

  • Contraction in the labor force: A minimum guaranteed income could encourage laziness and lead people to leave the labor force. Without any kind of exchange in return, UBI in India could easily degenerate into a program that treats working-age people as supplicants and leaves them with no true meaning or purpose in life.
  • Increase the Inflation Rate: UBI might expose the populace to additional market risks and inflation if it were to take the place of programs like food assistance. Price changes will have an impact on consumers’ purchasing power.
  • Lack of Communication Between the Government and the Beneficiary: The fact that the poorest people in India tend to reside in rural areas without access to banks or frequently mobile phones raises serious concerns. Banks have not reached every habitation, thus it takes a lot of time and effort to physically access banking services.
  • Ostentatious spending: UBI beneficiaries are free to use the money anyway they like; it is not conditional on how they behave. Families who are uninformed about money management may engage in wasteful spending. There is no assurance that the money would be used for worthwhile endeavors like health and education. Spending it on booze, drugs, tobacco, and other opulent items is possible.
  • Increased government spending: The gap between the rich and the poor in India will expand if UBI is made universal, which means that all citizens, regardless of their financial capabilities, are automatically beneficiaries. Adopting a universal strategy in India will increase government spending because it would be necessary to make sure that no citizen is left out. If a UBI is implemented, it might be challenging for the government to terminate it in the event of failure.
  • The term “universal income” suggests that everyone, even the wealthy, will receive it. This could result in push-back from a variety of groups and generate issues with equity and public assistance for the poor.

Benefits of Universal Basic Income:

  • Promotes efficiency: A UBI will merely be a transfer of resources from above and will not require recipients to “access” it. Additionally, by emphasizing universality, UBI lessens the administrative load by eliminating the time-consuming job of segregating the poor from the non-poor. A UBI theoretically decreases leakage because transfers are made directly to the bank accounts of recipients. Due to the nearly complete elimination of authorities’ discretionary powers, the potential for diversion is greatly diminished.
  • Combating poverty:  UBI supporters claim that it could assist in raising everyone’s income over the federal poverty level.
  • Preventing poor pay: Employees would have sufficient security under a UBI to bargain with employers.
  • Transferring wealth: High-income countries’ economic growth increases wealth for the wealthy while having virtually little impact on the working classes. 
  • Social Justice: UBI serves as a first-line indicator of how equal a society is. Any society that does not have equal income distribution fails the justice test. UBI upholds many of the fundamental principles of a culture that loves each person equally. It encourages equality because it is anti-paternalistic and allows for labor markets to be flexible. By making government transfers more transparent, it encourages efficiency. On the provided website, you may get more information about transparency in the administration.
  • Employment: The labor market may see new opportunities as a result of UBI. By enabling people to participate in standardized or fragmented ways in the labor market without worrying about losing their benefits, it promotes tractability. Since people won’t have to accept any working circumstances in order to exist, they make room for greater non-exploitative negotiating.
  • Regulatory credit: Institutional credits only make up 15% or less of the overall borrowing by landless agricultural workers, and only 30% of the borrowing by marginal and small farmers, according to statistics from the 70th round of the National Sample Survey Office (NSSO). These groups are forced to borrow money at excessive interest rates ranging from 24 to 60% from moneylenders.

Challenges of Universal Basic Income:

  1. The method has a difficulty when benefits are restricted to particular groups and cutoffs are established. Financial problems can arise when budget cut-offs for different segments must be determined rather than a set budget for the program encompassing all citizens. A targeted program cannot be described as universal, and another round of the Socio Economic and Caste Census (SECC) will be necessary to obtain beneficiaries’ most recent information because the 2012 data is no longer accurate.
  2. The execution of a universal basic income program suggested by experts and raised in the 2016–17 Economic Survey has been hampered by practical difficulties. It will be difficult to execute a universal basic income program to reduce economic disparity; this includes finding beneficiaries, winning their support, and overseeing execution.
  3. Only 20 ATM’s are present in India for every one lac adults, according to the World Bank. Only about one-third of adult Indians have a bank account. The infrastructure of financial services and financial inclusion being in such a state, it would be challenging for the populace to obtain advantages.
  4. Another difficulty would be paying for the “guaranteed minimum income.” There is a probability that UBI will complement current subsidies rather than completely replace them.


Significant leakages are one of the main objections leveled at projects to reduce poverty. UBI is thought to be a more effective substitute. Although UBI provides numerous benefits, there are also many real-world difficulties. Better targeting should be used to reduce costs. This will contribute to establishing the prerequisites for greater growth, which will significantly raise people out of poverty. Every adult citizen would receive a monthly or yearly sum of money that they could use anyway they pleased as part of a universal basic income, which would give them security and financial independence. The money would be sufficient to meet basic needs including food, shelter, transportation, and healthcare, but not to live a lavish lifestyle. Some claim that UBI would lessen the incentive for individuals to work and that UBI recipients would be less motivated to search for higher-paying jobs because they would be financially secure even if they failed to obtain better employment.

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