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27th October 2023 (9 Topics)

Can Universal Basic Income tackle India’s poverty?

Context:

Localised experiments with Universal basic income (UBI) have shown mostly positive outcomes across states, strengthening calls in favour of the social policy.

Understanding Universal Basic Income (UBI)

  • Principles of UBI Support: UBI involves unconditional, periodic cash transfers to individuals, letting them spend as per their needs.
  • Addressing Concerns about UBI: Critics fear market distortions and dependency, but UBI's efficacy in poverty alleviation is being evaluated.
  • The WorkFREE Pilot: Implemented in Hyderabad, it supports 1,250 residents in slums, empowering them economically and offering insights into UBI's impact.

UBI's Positive Impact on Beneficiaries

  • Diverse Use of UBI: Beneficiaries use cash support for food, fuel, education, and health expenses, demonstrating its versatility.
  • Enhancing Economic Activities: UBI aids in expanding businesses and investing in assets, contributing to economic growth in slum communities.
  • Breaking Generational Poverty Cycle: UBI is seen as a safety net, offering hope for families to escape entrenched poverty through education and economic opportunities.
  • The Universal Basic Income (UBI) is characterized by unconditional and periodic cash transfers and is being assessed for its impact on poverty eradication.

Impact on Society:

  • Reduction in Inequality: UBI can address income disparities, offering a safety net for vulnerable populations, fostering greater social equity.
  • Enhanced Social Security: UBI provides a universal safety net, reducing poverty and improving overall societal well-being and security.
  • Economic Empowerment: UBI can stimulate local economies, empowering individuals to invest in education, healthcare, and entrepreneurial ventures.
  • Freedom to Pursue Passions: UBI can offer individuals the freedom to pursue creative and innovative endeavors without financial constraints.

What are the challenges?

  • Market Distortion: UBI may discourage work, leading to labor market distortions and reduced productivity.
  • Dependency Concerns: UBI might create a culture of dependency on the state, potentially disincentivizing self-reliance and productivity.
  • Financial Feasibility: Doubts exist over the economic sustainability of implementing UBI on a large scale, straining government resources.
  • Debt and Mindless Spending: The reckless spending and accumulation of debt without oversight, potentially exacerbating financial instability due to UBI.
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