Q What is Universal Basic Income?

How effective can be strategy of providing a

universal basic income to the poor as a poverty alleviation measure in India? Critically
evaluate while discussing its pros and cons.

Universal Basic Income (UBI) refers to the direct and unconditional income support provided to
all the citizens of the country in lieu of subsidies. So, UBI is a relatively new & modern concept
which has conceptualized for reducing or eliminating poverty and improving budgetary finances
of the Government.

Currently, Union Government provides various kinds of explicit subsidies (Subsidy on Food,
Fertilizers, Petroleum, etc.) and implicit subsidies (such as subsidized rail travel fare), which puts
a heavy burden on the finances, for example, as per Budget 2022-23, provisional subsidy
expenditure is over 3 lakh crore. Moreover, these subsidy programmes are running since very
long times but poverty prevalence rate is still a high figure, for example, as per latest Multi-
dimensional poverty (MPI) Index released by the NITI Aayog based on NFHS-4 data, one Indian
out of every four is still multi-dimensionally poor.

Therefore, UBI is being seen as an alternative to reduce high poverty rate in India. However, as
quoted by Economic Survey 2017, if we want to bring poverty to zero in India, then UBI
expenditure will be in the range of 10.8% of the GDP (Rs 12730 per year/per person ) , which is
not viable at this point of time due to already worsened fiscal indicators such as high Fiscal
Deficit (6.4% of the GDP). Therefore, instead a reduced UBI may be adopted so that it does not
put pressure on the fiscal indicators.

1% of GDP is going to well-off in the form of implicit subsidies.

PROS of UBI:

1. Better Targeting: Current subsidy programme suffers from both "Inclusion Error" and
"Exclusion Error", which can be eliminated by providing an uniform UBI to all.

2. Enhancing Efficiency: Prevalent subsidy programmes such as food distribution, etc. requires
heavy administrative machinery and are not very effective due to heavy leakage, corruption,
etc. These problems can be solved by adopting UBI.

Poverty Reduction

Social Justice
 CONS of UBI:

Lack of the political will because of the costs involved.

1.As explained above, providing a high UBI will not be economical, therefore, reaching to a
optimum level of UBI will be a contentious issue so as to what rate of poverty can be left to
prevail in the economy.

2. Complacency: UBI may reduce worker's willingness to work and therefore, may reduce
overall labour force participation in the economy.

3. UBI may give rise to domestic abuse for the women, as she will be forced to handover UBI to
the male head of the family.

 There is no guarantee that the given cash will be spent on productive activities, health & education, etc. It
may be spent on tobacco, alcohol, drugs, and other luxury goods etc.

Therefore, keeping in view of the above facts, UBI is an idea whose time has come, however,
UBI value has to be scientifically reached so that it is effective in reducing poverty to the
maximum extent and help India to achieve the very first Sustainable Development Goal (SDG)
of reducing extreme poverty in all its forms everywhere.