Explained: Universal Basic Income


The ongoing coronavirus pandemic which is creating changes that could lead to dividing society into pre- and post- COVID-19 days. The incoming changes are also likely to exacerbate the novel challenges accompanying the fourth industrial revolution.


  • According to Rangarajan committee (2014), after the three decades of sustained economic growth and a proliferation of welfare schemes, roughly one in three Indians still live below the poverty line.
  • One of the earliest proponents of some form of basic income was Spanish philosopher Johannes Ludovicus Vives, who proposed that the government should ensure the minimum level of subsistence for all, but only to those who showed willingness to work.
  • It is an unconditional cash transfer (unlike in-kind benefits like subsidized food or freebies like bicycles or TV sets distributed by political parties) for all people (or at least all people below some income threshold).
  • In less developed countries, it is being conceived as a general anti-poverty measure, whereas in advanced industrial economies, it is being seriously considered as a possible initiative to take care of the unemployed as job insecurity is rising due to rapid technological progress.
  • Countries across the world such as Kenya, Brazil, Finland, and Switzerland, have bought into the concept of Universal Basic Income (UBI) and have begun controlled UBI pilots to supplement their population.

Need of Universal Basic Income in India

  • By adopting the Universal Basic Income, the India’s huge capacity and infrastructure-building requirements will support plenty of hands in the foreseeable future.
  • A UBI on par with the numbers suggested by the Economic Survey (2016-17) could lead to targeted household incomes increasing by almost 40,000 per annum, since the average Indian household size is approximately five.
  • The persistence of poverty and significant leakages in welfare schemes that aim to alleviate it has called for an alternative path to ensure regular and basic incomes to the poor.
  • People fall into poverty due to illness, drought, declining opportunities in agriculture, and urban blight.
  • A universal programme would not only be more appropriate but it will also reduce the burden of the bureaucracy as it is engaged in identifying the deserving beneficiaries of any targeted programme.
  • It aims to ensure in reduction of distress due to migration.
  • The minimum income security would enable individuals to plan their lives better and undertake more meaningful activities rather than be trapped in distress-driven activities in search of subsistence.

Importance of Universal Basic Income

  • It could provide a solution that could tackle the looming crisis caused by dwindling job opportunities.
  • It is deliberated as an effective tool for eradication of poverty.
  • UBI in its true sense would entail the provision of an unconditional fixed amount to every citizen in a country.
  • It is universal and not targeted because the targeted social and welfare schemes often excludes a lot of the deserving households from receiving subsidies, people often fall in and out of poverty.
  • It is a cash transfer scheme rather an in-kind transfer as in in-kind transfers such as food and grains under Public Distribution System (PDS) are often tend to create market-distortion scenarios.
  • Cash transfer scheme is not a conditional scheme and UBI is not tied to exhibiting certain behaviour and the people are free to spend the cash as they want.
  • There have been numerous studies that such grants led to more labour and work with a shift from casual wage labour to more own-account (self-employed) farming and business activity.

Challenges in Implementing Universal Basic Income in India

  • There is a growth of disruptive technologies such as artificial intelligence are ushering in productivity gains that we have never seen before and  are also steadily reducing human capital requirements, making jobs a premium.
  • The high cost involved in implementing UBI is a major factor contributing towards lack of political will in working towards the universal basic income in India.
  • With over 90% of the India’s workforce is employed in the informal sector without minimum wages or social security.
  • It is viewed as a means to demolish complex welfare bureaucracies while recognizing the need for some social transfer obligations in a way that doesn’t weaken incentives significantly.
  • It would reduce the motivation for work and might encourage people to live off assured cash transfers and it is simply unaffordable.

Measures to be adopted to successfully implement Universal Basic Income in India

  • The Economic Survey (2016-17) and the International Monetary Fund (IMF) had proposed quasi-basic income schemes that leave out the well-off top quartile of the population as an effective means of alleviating poverty and hunger.
  • The government must shed its paternalistic attitude of assuming that it knows better than citizens how resources must be allocated, then it is only natural to ask the poor, the intended beneficiaries of any welfare scheme, how they would like to receive the subsidy i.e. in cash or in kind.
  • Some of the challenges in implementing Universal Basic Income could be met with the better use of technology and an expansion in banking services.
  • India could move towards a basic income by replacing some misleading dysfunctional welfare spending but leaving untouched public education and healthcare, pre-school nutrition programmes, or employment guarantees in public works.
  • The required budgetary resources for implementing universal basic income could be raised by cutting the implicit and explicit subsidies to the rich (in the form of tax breaks or subsidies given to goods largely consumed by the relatively well-off), or by raising additional taxes by improving property tax collections (currently extremely low).
  • The government should not resort to raising additional tax revenue through indirect taxes and cess during transition to a universal basic income, which is regressive in nature and more distortionary than direct taxes.
  • Another way of financing the UBI scheme is by building an additional government kitty using a part or whole of the Corporate Social Responsibility (CSR) money of all the public and private sector companies.

Way Forward

  • The universal basic income seeks to provide unconditional cash to every individual, or household, and the individuals would be free to use the cash as per their discretion and spend according to their own preferences.
  • It is possible that nationwide implementation of such assured cash transfers might reduce the availability of agricultural labourers willing to work in others’ farms.
  • The universal basic income could increase the agricultural wages and the subsequent welfare schemes such as Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
  • The pilot implementation of Universal Basic Income has showed that those who received grants undertook small-scale investments, such as for more and better seeds, equipment repairs, establishment of little shops, etc., which potentially raised long-run productivity.

Source: The Hindu

Leave a Reply