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A Universal Basic income – Is it the right time

A Universal Basic income – Is it the right time

PSC CSE Mains Syllabus: GS-2- Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

A universal basic income is a government guarantee that each citizen receives a minimum income without any preconditions. It is also called a citizen’s income, guaranteed minimum income, or basic income. The intention behind the payment is to provide enough to cover the basic cost of living and provide financial security.

  • Universal basic income has been proposed internationally in lieu of employment or income guarantee schemes.
  • It is envisaged as a method of redistribution of resources from the rich to the poor.

In 1967, Martin Luther King Jr. said a guaranteed income would abolish poverty.That means reducing income inequality as well.

Economist Milton Friedman proposed a negative income tax. The poor would receive a tax credit if their income fell below a minimum level. It would be equivalent to the tax payment for the families earning above the minimum level.

In India, the idea of a national UBI emerged with the 2016-17 Economic Survey. The survey laid out the blueprint for a ‘quasi’ UBI, proposing 7,620 per year to 75% of the population. In 2019 prices, this would cost the Indian government around 4.5% of GDP.

Should subsidies end:  

  • Foodand fertiliser subsidies are meant to benefit incomes of farmers and provide limited cheap food to all those who want it. Both may help the poor, but they will not end poverty.
  • Most other subsidies, tax exemptions, etc. are meant to stimulate growth or exports or effect structural change, not end poverty.
  • However, UBI intervention by the state eliminates poverty and reduces income inequality.
  • When the market forces failed to narrow the income gapit is requisite on the government to intervene. 
  • Growth is expected to hugely benefit only few who possess the human and financial capital to produce it and earn incomes from it – the rest, much more than half the population, will require a permanent transfer from this few.

Road ahead:

  • In India, there is no comprehensive social security scheme. We have the MGNREGAscheme that bears a similarity to UBI. MGNREGA guarantees work on demand and pays a wage per day that is equivalent to the prevailing wage of a farm labourer.
  • Hence UBI could be considered in a targeted manner.
  • Selecting the beneficiaries is crucial. For this a basic income level needs to be fixed.
  • Limited roll out of the UBI on an experimental basis could be considered.
  • Rationalisation of some subsidiescould be considered.
  • UBI should supplement, rather than substitute existing in-kind transfers such as free education or basic health insurance.
  • India has one of the lowest tax-to-GDP ratiosin the world. The government should seriously increase tax resources if it is to pursue a universal basic income.

The time has arrived to seriously consider abolishing the poverty and bring inclusive growth.

Source:”Economic Times “.

Possible UPSC CSE Mains Question:

Is this the opportune moment to roll out a Universal Basic Income to alleviate poverty in the nation? Discuss.