Model Answer
0 min readIntroduction
Universal Basic Income (UBI) is a periodic cash payment unconditionally delivered to all citizens of a country, without a means test or work requirement. The concept has gained traction globally as a potential solution to address rising inequality and job displacement due to automation. In India, despite significant economic progress, extreme poverty remains a persistent challenge. According to the World Bank (2022), approximately 5.6% of the Indian population lives below the international poverty line of $2.15 per day. Given this context, the question of whether UBI can effectively reduce extreme poverty in India warrants a detailed examination, considering both its potential benefits and inherent challenges.
Potential Benefits of UBI in Reducing Extreme Poverty
UBI offers several potential advantages in tackling extreme poverty in India:
- Poverty Reduction: A regular, unconditional cash transfer can directly address the income deficiency of the poorest households, enabling them to meet their basic needs like food, shelter, and healthcare.
- Improved Health and Education Outcomes: Increased income can lead to better nutrition, healthcare access, and school enrollment rates, particularly for children in impoverished families. Studies have shown a strong correlation between income and human development indicators.
- Economic Stimulus: UBI can boost aggregate demand by increasing the purchasing power of low-income households, stimulating local economies and creating employment opportunities.
- Empowerment and Dignity: UBI provides individuals with greater financial autonomy and reduces their dependence on often-exploitative informal labor markets. It recognizes the inherent dignity of every citizen.
- Simplified Welfare System: UBI can potentially replace a complex web of existing welfare schemes, reducing administrative costs and leakages.
Challenges to Implementing UBI in India
Despite its potential, implementing UBI in India faces significant hurdles:
- Fiscal Sustainability: The cost of implementing UBI across India’s vast population would be substantial. Estimates vary widely, but even a modest UBI could require a significant portion of the government’s budget. A 2019 Economic Survey explored various UBI scenarios, highlighting the fiscal implications.
- Implementation Issues: Ensuring efficient and leak-proof delivery of UBI to all eligible citizens, particularly in remote areas with limited banking infrastructure, is a major logistical challenge. The JAM (Jan Dhan, Aadhaar, Mobile) trinity is crucial but not foolproof.
- Potential Disincentive to Work: Critics argue that UBI may discourage people from seeking employment, leading to a decline in the labor force participation rate. However, evidence from pilot programs is mixed.
- Inflationary Pressures: Increased demand without a corresponding increase in supply could lead to inflation, eroding the real value of the UBI payment.
- Political Acceptability: UBI may face political opposition from those who believe it is fiscally irresponsible or undermines the work ethic.
Alternative Approaches and Modifications
Given the challenges, a phased and modified approach to UBI may be more feasible:
- Targeted Basic Income (TBI): Instead of universal coverage, focus on providing UBI to the most vulnerable populations, such as the elderly, disabled, and landless laborers.
- Conditional Cash Transfers (CCTs): Link UBI payments to certain conditions, such as school attendance or health check-ups, to incentivize positive behaviors. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) can be seen as a form of CCT.
- Pilot Programs: Conduct rigorous pilot programs in different regions to assess the impact of UBI on various socio-economic indicators before scaling up. The Madhya Pradesh UBI pilot (2011-2012) provided valuable insights.
- Revenue Mobilization: Explore innovative revenue mobilization strategies, such as progressive taxation and curbing tax evasion, to finance UBI.
Comparison with Existing Schemes
UBI differs significantly from existing welfare schemes in India:
| Feature | Existing Schemes (e.g., MGNREGA, PDS) | Universal Basic Income (UBI) |
|---|---|---|
| Targeting | Targeted towards specific groups | Universal – all citizens |
| Conditionality | Often conditional (work, eligibility criteria) | Unconditional |
| Delivery Mechanism | Varied – often through public distribution system or direct benefit transfer | Direct cash transfer |
| Administrative Costs | Relatively high due to targeting and monitoring | Potentially lower due to universality |
Conclusion
While UBI holds the potential to significantly reduce extreme poverty in India by providing a safety net and empowering vulnerable populations, its implementation faces substantial fiscal and logistical challenges. A cautious, phased approach, potentially starting with a Targeted Basic Income and supported by robust revenue mobilization strategies, appears more pragmatic. Further research, pilot programs, and careful consideration of potential inflationary pressures are crucial before considering a full-scale UBI rollout. Ultimately, UBI should be viewed not as a panacea, but as one component of a broader strategy to promote inclusive growth and social justice.
Answer Length
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