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Inclusive Growth, Poverty & Inequality (DAMP)

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• The presence of inclusive growth within an economy eliminates the necessity for a Universal Basic Income. Discuss in the context of India.

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04-08-2023

Q: The presence of inclusive growth within an economy eliminates the necessity for a Universal Basic Income. Discuss in the context of India. (15 Marks, 250 Words)

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Answer :

Universal Basic Income (UBI) is a provision of periodic and unconditional cash payment to all citizens. Rapid expansion of direct cash transfers linked to the national biometric database and small basic income experiments have galvanized an extensive debate on UBI. Many have argued that the focus should be on inclusive growth rather than moving towards UBI. This can be further understood through the following arguments:

Inclusive growth preferred over Universal Basic Income (UBI):

• Inclusive growth promotes productivity, wages, and income for all, benefiting marginalized sections, whereas UBI may not address specific needs or root causes of inequality.
• Inclusive growth avoids potential disincentives to work and productivity that UBI can create, encouraging individuals to seek employment and engage in entrepreneurial activities.
• Inclusive growth tackles inequality at its core, while UBI redistributes income through taxation, which may inadvertently benefit the already privileged segments of society.

UBI can promote inclusive growth through:

• UBI redistributes income to provide a basic level of financial security, which can empower individuals and reduce poverty, contributing to inclusive growth.
• UBI addresses income disparities, ensuring a minimum level of support for all, and allowing individuals to invest in education, healthcare, and entrepreneurial endeavors, promoting inclusive growth.
• UBI replaces ineffective anti-poverty programs and subsidies, enabling more efficient resource allocation and reducing distortionary effects, thereby fostering inclusive growth.

In a diverse country like India, a one-size-fits-all UBI may not effectively address the unique challenges and requirements of different communities, necessitating more localized and customized solutions. Instead of relying solely on UBI, a combination of targeted interventions, skill development programs, and infrastructure investments can provide individuals with better opportunities for upward mobility and economic empowerment.