Universal Basic Income

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Universal Basic Income

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Universal Basic Income

  • Universal basic income is a form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.
  • The Economic Survey 2016-17, presented last month, advocated a Universal Basic Income scheme as an alternative poverty reduction mechanism in place of various ongoing social welfare programmes.
  • “A UBI that reduces poverty to 0.5 per cent would cost between 4-5 per cent of GDP, assuming that those in the top 25 per cent income bracket do not participate,” the Survey said.

Universal Basic Income

Universal Basic Income : Initiatives from other countries

  • Switzerland: Switzerland considered introducing a basic income for its citizens last year but Swiss voted on and rejected a proposal to guarantee every adult citizen and long-term resident 2,500 Swiss francs (around Rs1.7 lakh) per month.
  • Finland: The two-year pilot scheme will provide 2,000 unemployed Finnish citizens, aged between 25 and 58, with a monthly basic income of 560 euros ($581.48) that will replace their other social benefits.
  • Scotland: Scotland looks set to be the first part of the UK to pilot a basic income for every citizen, as councils in Fife and Glasgow investigate trial schemes in 2017.
  • In India:
    • Sarath Davala, an independent sociologist based in Hyderabad, has started a blog in 2015, focused on basic income in India. Davala worked closely on the Indian Basic Income Pilot projects with Renana Jhabvala, Soumya Kapoor Mehta, and Guy Standing, authoring Basic Income: A Transformative Policy for India.
    • In June 2016, Indian parliamentarian Varun Gandhi said that, Regular basic income payments can help institute rational responses to illness or hunger, enabling households to fund their health expenses instead of encountering a vicious cycle of debt.

Need of Universal Basic Income in India

  • Over 950 central sector and centrally sponsored sub-schemes in India accounts for aroung 5% of GDP and if includes state’s schemes, it would be very large magnitude and it leads to inefficiency.
  • Misallocation of resources : poorest areas of the country often obtain lower share of government resources when compared to richer counterparts.
  • Exclusion error: genuine poor sometimes unable to access the program benefits.

Universal Basic Income : Advantages

  • Social Justice: minimum guaranteed income to all the citizens
  • Poverty Reduction: may be the fastest way of reducing poverty
  • Employment: labour market can allow non-exploitative bargain with individuals for secured benefits
  • Administrative Efficiency: unlike subsidy, can avoid misallocation, leakages and exclusion of the poor.

Universal Basic Income : Disadvantages

  • Conspicuous spending: may spend the additional income on some wasteful activities
  • Labour supply: make people lazy and may reduce labour supply
  • Fiscal cost: spending on Universal Basic Income would be financial burden to government, so has to compensated by widening the tax net.
  • Difficult for exit: once introduced, it may become difficult for the government to wind up a Universal Basic Income scheme in case of failure.

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