Universal Basic Income

In Context 

• As proposed by the experts, Practical challenges in implementation can come in the way of rolling out a universal basic income scheme.

What is Universal Basic Income (UBI)?

• The Economic Survey 2016-17 has recommended Universal Basic Income (UBI) as an alternative to the various subsidy focused social welfare schemes that aim to reduce poverty.
• UBI is a sum of money provided by the State to all citizens to take care of the bare necessities of life. 
• This provides a “safety net preventing any citizen” from sinking below a basic minimum standard of living

• A basic income is an income unconditionally granted to all citizens on an individual basis, without means test or work requirement.
• It is a form of minimum income guarantee that is being paid irrespective of any income from other sources.
• Components: It have three components:
  • Universality: UBI for all
  • Unconditionality: UBI without any conditions.
  • Agency: UBI can make a citizen move away from being a subject of government welfare programmes to agents of its own change.

Significance

• It will guarantee to each individual a minimum income for a dignified life with access to basic goods.
• The scheme will provide every citizen unconditional cash transfer in place of the many benefits, like health facilities, fertiliser, fuel, food subsidies etc.
• The payments could help stabilise the economy during recessionary periods.
• It will promote social justice by reducing poverty.
• Increase the purchasing power of every poor which will further increase aggregate demand.
• Easy to implement because no identification of the beneficiary is involved.
• Reduce the wastage of government money because its implementation is very simple.

Issues related to Implementation 

• Rolling out a universal basic income will be an uphill task — from identifying beneficiaries to getting them on board and monitoring implementation
• The problem in the scheme comes when cut-offs are set and benefits are targeted at certain groups.
  • Fiscal issues also surface when, rather than having a fixed budget for the scheme covering all citizens, cut-offs for various segments have to be worked out.
• Cost 
  • The scheme is expected to become unsustainably large, stretching the country’s finances to a breaking point.

•  Other issues 

• Disincentivization to the work and the work productivity may decrease.
• It can cause more social problems like more alcohol consumption, tobacco consumption etc.
• Inflation could be triggered because of the increase in demand for goods and services.

Conclusion & Way Forward 

• UBI should be made universal first across easily identifiable vulnerable groups like widows, old, pregnant women etc. 
• An institutional mechanism has to be in place for rolling out universal basic income.
• It  will also require another round of Socio Economic and Caste Census (SECC) to get updated data on beneficiaries as the 2012 data is now outdated and does not provide the correct picture,
• The country simply does not have this magnitude of resources, so state finances would need to improve further before such an idea is considered implementable.

Source:LM