The idea of Universal Basic Income

In the Economic Survey 2017, the Chief Economic Adviser does mention his much-propagated idea of the Universal Basic Income. What is the concept of UBI and what are the various aspects related to it, we will understand in this blog.

  • What is the Universal Basic Income?
    • It is an income which has three components, namely
      • Universality, that is, given to all
      • Unconditionality, that is, will be given without any pre-conditions or eligibilities
      • Agency, that is, the beneficiary will be allowed to spend it according to his/her needs.

Image result for universal basic income aravind


  • What is the need of UBI?:
    • Poverty persists despite so many welfare programmes.
    • The situation of employment remains dismal.
    • This is a situation of social injustice.
    • The gap between the rich and the poor remains to be bridged.
    • It is important to elevate the poor at least to such level after which they could work for their own welfare.
    • Subsidies amount to around 5% of the GDP. These are not distributed well and leakages undermine the intent of these subsidies.
  • What are the arguments in favor of the idea?:
    • Philosophically, it is in line with the ideals of equality and social justice
    • Poverty and vulnerability reduction
    • Choice with the poor to spend accordingly. Money-in-hand could also help in backing the entrepreneurial aspirations
    • Better targeting of poor, as all are targeted–>no inclusion errors
    • Provides insurance against shocks like health, income among others
    • Lesser psychological shocks due to guaranteed incomes
    • Lesser burden of implementation of CSS will increase the efficiency of the administration
    • Improvement in financial inclusion: as it will encourage greater usage of bank accounts.
  • What are the arguments against the idea?:
    • Irresponsible spending. For eg. men may spend it in liquor, gambling etc
    • Could reduce the tendency and will to work–>Goes against the Gandhian principle of earning one’s own bread through labour
    • Men may exercise the control over the whole income–>inducing gender disparity.
    • Implementation is going to be a challenge–>stressed banking system.
    • Fiscal deficit may increase.
    • Inflation may increase due to increase purchasing power.
    • Rich also getting the income –>absurd and philosophically empty.
    • It may be followed or preceded by the repealing of the current subsidies.
  • What are the challenges?:
    • Ensuring transparency in the process of transferring the amount.
    • Putting in place a large machinery required to implement the idea.
    • Ensuring timely transfer of the benefit to the beneficiary.
  • What is the way ahead?:
    • Bank accounts for all. Even after PM Jan Dhan Yojna, a number of people, particularly, in the rural areas remain without any account.
    • Universal availability of Aadhar: Till now, around 95% of the population is registered under UIDAI.
    • Time bound transfer within the date stipulated.
    • Financial literacy among the people to operate their bank accounts.
    • Awareness about the scheme and sensitisation about the legitimate spending of the money.



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