Answer Writing Practice for UPSC IAS Mains Exam: Paper - IV (General Studies – III) - 01 February 2019


Answer Writing Practice for UPSC IAS Mains Exam


UPSC Syllabus:

  • Paper-IV: General Studies -III (Technology, Economic Development, Bio-diversity, Environment, Security and Disaster Management)

Q. Critically examine the case for the Universal Basic Income in India. (250 words)

Model Answer:

Approach:

  • Why in news?
  • Introduction
  • Arguments in Support
  • Arguments in Against
  • Conclusion

Why in news?

  • FINANCE Minister Piyush Goyal unveiled the Pradhan Mantri Kisan Samman Nidhi promising “assured supplemental income” to disadvantaged farmers.
  • On January 28, Rahul Gandhi said a Congress government would provide “minimum income guarantee” to the poor.
  • Sikkim’s SDF government has assured universal basic income to its 6.10 lakh people by 2022.

Introduction

  • Universal Basic Income (UBI) which is an unconditional and uniform cash transfer from the government to every adult, rich or poor.
  • The idea of a universal basic income has gained currency in the West because of the threat of automation-induced job losses. In India, the idea first gained currency as a solution to chronic poverty and government’s failure to effectively target subsidies towards the poor. Sikkim is set to become the first state in India to roll out Universal Basic Income (UBI).
  • The idea underlying UBI is that every person should have a right to a basic income to cover their needs, just by virtue of being citizens, irrespective of their employment status.
  • Characteristics of UBI are –
    • It is universal and not targeted at the poor alone.
    • It is a cash transfer so that there is no need to provide in-kind transfers (for example food stamps) or subsidies for certain goods and services.
    • It is unconditional so that it is not contingent on the recipients conforming to stipulated norms of behavior.

Arguments in Support

  • Poverty and vulnerability reduction - Poverty and vulnerability will be reduced in one fell swoop.
  • Choice - A UBI treats beneficiaries as agents and entrusts citizens with the responsibility of using welfare spending as they see best, this may not be the case with in-kind transfers.
  • Better targeting of poor - As all individuals are targeted, exclusion error (poor being left out) is zero though inclusion error (rich gaining access to the scheme) is 60 percent.
  • Insurance against shocks - This income floor will provide a safety net against health, income and other shocks.
  • Improvement in financial inclusion –
    • Payment—transfers will encourage greater usage of bank accounts, leading to higher profits for banking correspondents (BC) and an endogenous improvement in financial inclusion.
    • Credit—increased income will release the constraints on access to credit for those with low-income levels.
  • Psychological benefits - A guaranteed income will reduce the pressures of finding a basic living on a daily basis.
  • Administrative efficiency - A UBI in place of a plethora of separate government schemes will reduce the administrative burden on the state.

Arguments in Against

  • Conspicuous spending - Households, especially male members, may spend this additional income on wasteful activities.
  • Moral hazard (reduction in Labour supply) - A minimum guaranteed income might make people lazy and opt out of the labour market.
  • Gender disparity induced by cash - Gender norms may regulate the sharing of UBI within a household—men are likely to exercise control over spending of the UBI. This may not always be the case with other in-kind transfers.
  • Implementation - Given the current status of financial access among the poor, a UBI may put too much stress on the banking system.
  • Fiscal cost given political economy of exit - Once introduced, it may become difficult for the government to wind up a UBI in case of failure.
  • Political economy of universality—ideas for self-exclusion - Opposition may arise from the provision of the transfer to rich individuals as it might seem to trump the idea of equity and state welfare for the poor.
  • Exposure to market risks (cash vs. food) - Unlike food subsidies that are not subject to fluctuating market prices, a cash transfer’s purchasing power may severely be curtailed by market fluctuations.

Conclusion

UBI is indeed desirous, however, there are many practical challenges too. Resource mobilization has to increase ten-fold for India to afford the universal basic income without cutting back on other social welfare programmes. Unless the government seriously increases tax resources, the proposal for a universal basic income is at best a fantasy idea.

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