GS 3: Economy

Why in News?

Economic Survey for the year 2016-17 has an entire chapter dedicated to the discussion on Universal Basic Income (UBI).


  • Universal Basic Income is a periodic, unconditional cash transfer to every citizen in the country.
  • Here, social or economic positions of the individual are not taken into consideration.

Main features of UBI:

  • UBI is universal in nature. It means UBI is not targeted.
  • The second feature of UBI is cash transfer instead of in-kind transfer.
  • The third feature is that UBI is unconditional. That means one need not prove his or her unemployment status or socio-economic identity to be eligible for UBI.

How UBI works?

  • Under UBI, only those with zero income will receive the full benefits in net terms.
  • For those, who earn additional income over the basic income, the net benefits will taper off through taxation.
  • So even though the basic income is universal, only the poor will receive the full benefits.

What UBI means to the Government?

  • There would be drastic changes in the way government spends its revenue generated from taxation and other sources.
  • Currently, Government spends its revenue on various services as well as on subsidies.
  • UBI would mean that government may move away from service delivery and empower its citizens to access services through cash transfer.

Arguments against UBI:

  • A guaranteed minimum income might make people lazy and it breeds dependency. They may opt out of labour market.
  • There is no guarantee that the additional income will be spent on education, health etc. there are chances that the money will be spent on ‘temptation goods’ such as alcohol, tobacco, drugs etc.
  • Given the large population size, the fiscal burden on government would be high.
  • If the UBI is funded by higher taxes, especially by the indirect taxes, it will result in inflation.
  • A ‘guaranteed minimum income’ might reduce the availability of workers in some sectors
    which are necessary but unattractive and raise the wages of such works.
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