Whether India should introduce a Universal Basic Income (UBI)

Source: The post whether India should introduce a Universal Basic Income (UBI) has been created, based on the article “Is it time for India to introduce a Universal Basic Income?” published in “The Hindu” on 13th August 2024

UPSC Syllabus Topic: GS Paper 3 – Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context: The article discusses whether India should introduce a Universal Basic Income (UBI) due to jobless growth and rising inequality. Experts N.R. Bhanumurthy and Arun Kumar debate the feasibility and need for UBI in India, considering current social safety nets, employment policies, and economic challenges.

What is the current situation of unemployment in India?

1. Unemployment in India is a serious issue, especially among youth.
2. As per the ILO, 83% of India’s unemployed population consists of young people.
3. Jobless growth is rising, where output increases but employment does not.
4. Automation and AI are reducing jobs, especially in industries like banking and retail.
5. E-commerce growth is replacing traditional retail jobs.

What is Universal Basic Income (UBI)?

It is a guaranteed regular cash transfer by the Government to all citizens irrespective of their income or financial condition. As a universal safety net, UBI will be applied to all individuals, irrespective of income and age. The Economic Survey (2016-17) had noted that the UBI has 3 components namely; universality, unconditionality, and agency. Universal: UBI will cover all citizens, Unconditional: UBI has no criteria to select the beneficiaries, Agency: Providing support in the form of cash transfers to respect, not dictate, recipients’ choices.

For detailed information on Universal Basic Income read this article here

Why is UBI being considered in India?

1. Experts believe the lack of demand in the market is stunting growth. As unemployment rises, people have less income, leading to reduced demand for goods and services. This creates a cycle where growth slows further.
   2. UBI could provide a solution by putting money in people’s hands, which would increase demand and support economic growth.

What are the challenges in implementing UBI?

1. One major challenge is whether UBI would provide dignity to people without jobs.
2. Critics argue that paying people without work could lead to social division and political consequences.
3. Instead, they believe generating employment is essential for societal well-being and personal dignity.

What are the government’s current efforts?

1. The government has increased capital investments, focusing on sectors like railways, highways, and power. These sectors, however, are capital-intensive and do not generate many jobs.
2. Labour-intensive sectors, like education, health, and rural development, have faced budget cuts in real terms.
3. The Pradhan Mantri Awas Yojana, a rural housing scheme, has created employment opportunities with a multiplier effect on sectors like steel, cement, and electrical components.
4. Despite investments, critics argue that more focus is needed on employment-generating sectors to address rising unemployment effectively.

What Should be Done?

1. Focus on Social Safety Nets: Strengthen and universalize social safety nets across all states before implementing UBI. Current schemes like cash transfers for farmers and women are examples of semi-UBI in India.
2. Invest in Labour-Intensive Sectors: Redirect funds from capital-intensive projects to sectors like education, health, and rural development, which generate more employment.
3. Upgrade Workforce Skills: Address the mismatch between skills demanded by industries like AI and automation and the skills supplied. This will prepare workers for the new job market.
4. Raise Direct Tax Revenue: Increase the direct tax-to-GDP ratio, currently at 6.25%, to fund UBI.

Question for practice:

Evaluate whether implementing Universal Basic Income (UBI) in India would effectively address the challenges of unemployment and rising inequality, considering the current government efforts and economic conditions.