The idea of universal basic income does not seem pragmatic from the economic perspective; and therefore the focus should be on optimal utilization of available resources. Comment.

Universal Basic income is a model for providing all citizens of a country with a given sum of money, regardless of their income, resources or employment status.
Economic Survey 2016-17 had mooted the idea of UBI for India as a large proportion of the population in India still lives below the poverty line and a number of government programmes providing subsidies and support to the poor are marred by inefficiencies. The ones who deserve support do not receive it. Some of the subsidies meant for poor end up subsiding the richer section. UBI would solve these issues and provide poor with opportunity to decide where they wish to spend.
There are many challenges to UBI in India:

  • India doesn’t have the fiscal capacity to implement Universal Basic Income for example, the Economic Survey calculations showed that a 75% universality rate with an annual Universal Basic Income of Rs7,620 per year at 2016-17 prices will cost about 5% of the GDP and current subsidies account for only 4%.
  • It will be politically difficult to roll back existing subsidies to provide fiscal room for UBI.
  • Though under Jan Dhan Yojana, large population has been brought under banking net but issue of last mile connectivity of banking services is still an issue.
  • UBI may create a distortion in Labour market as a steady, permanent and guaranteed income without any work is likely to affect labour mobility and participation.
  • Political parties may use it as an issue during elections and promise to raise the amount which would be fiscally imprudent.
  • UBI cannot ensure the vast majority of citizens access to better nutrition, healthcare and educational facilities for their children.

Rationalization of subsidies, better targeting and operational efficiency of schemes is needed to bring real difference in the lives of millions of poor.

Question for UPSC Mains:
"The idea of universal basic income does not seem pragmatic from the economic perspective; and therefore the focus should be on optimal utilization of available resources." Comment. Live Mint | Hindustan Times

Published: October 17, 2017 | Modified:June 27, 2019

Comments