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  • Context (DTE | DTE | TH | FE | ES): Local experiments in India with universal basic income (UBI) have yielded positive results, bolstering support for this social policy.
  • UBI is a programme where every adult citizen receives regular, fixed payments as income support.

Arguments in Favour of UBI in India

  • Social Justice
  • Poverty Reduction
  • Agency: By taking the individual as the unit of beneficiary, UBI can enhance agency (esp. of women).
  • Employment: UBI promotes non-exploitative bargaining by freeing individuals from accepting harsh working conditions for survival.
  • Administrative Efficiency: It will help to overcome the weaknesses of existing welfare schemes (like misallocation, leakages and exclusion of the poor).
  • Choice: UBI provides unconditional cash benefits, allowing people to choose and pursue their goals.
  • No exclusion error: As all individuals are targeted, the exclusion error (poor being left out) is zero.
  • Insurance against shocks: UBI will provide a safety net against health, income and other shocks.
  • Financial inclusion: Direct benefit transfers will improve financial inclusion.
  • Psychological benefits: A guaranteed income will reduce the pressures of finding a basic living daily.
  • Ready infrastructure: When the trinity of Jan-Dhan, Aadhaar, and Mobile (popularly called JAM) is fully adopted, the transfer of UBI benefits will become easy.
  • The agency is the capacity of individuals to have the power and resources to fulfil their potential.
  • GoI launched Pradhan Mantri Jan Dhan Yojana in 2014 to provide basic banking facilities to the poor and underserved population.

Universal Basic Income Support History India

Arguments Against UBI in India

  • Conspicuous spending: Beneficiaries (esp. male) may spend the cash benefit on wasteful activities.
  • Reduction in labour supply: This guaranteed income might make people lazy and opt out of the labour market (this has happened with MGNREGA).
  • Gender disparity: Gender norms can influence UBI sharing within households, often with men having more control over spending.
  • Implementation: A UBI may put too much stress on the banking system (the banking infra is already stressed with Jan Dhan Yojana and various DBT schemes like PM KISAN SAMMAN NIDHI).
  • Fiscal cost: The UBI’s burden on the state exchequer will raise concerns about funding and taxation.
  • Difficulty in exit: Once introduced, it may become difficult for the government to wind up a UBI.
  • Inflation: Injecting large amounts of money into the economy through UBI can lead to inflation.
  • Market fluctuations: Cash transfers, unlike stable food subsidies, can see their purchasing power reduced by market price fluctuations.
  • Diverse Society: Due to India’s diversity, one-size-fits-all initiatives like UBI may fail.

Universal Basic Insurance vs Universal Basic Income

  • Universal basic insurance is a programme in which all citizens receive a basic level of insurance coverage, regardless of their income or employment status.
  • Universal basic insurance is a better proposition for India for two reasons.
    1. India’s insurance penetration (premium as a percentage of GDP) has been hovering around 4% for many years compared to 17%, 9%, and 6% in Taiwan, Japan and China, respectively.
    2. Although the economy is mostly informal, data on this sector is now accessible to businesses through GSTIN and unorganised workers through e-Shram.
  • GSTIN stands for Goods and Services Tax Identification Number.
  • Goods and Services Tax (GST) is a value-added tax implemented in India since 2017.
    • It is a single domestic indirect tax law that has replaced many indirect taxes levied by the Central and State Governments, such as excise duty, service tax, value-added tax (VAT), etc.
  • e-Shram is the centralised database of all unorganised workers.
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