Redraw Welfare Architecture: Place a UBI in the Centre

Syllabus: Governance

Source: TH

Context: The proposal to place Universal Basic Income (UBI) at the centre of India’s welfare architecture has gained renewed attention amid growing income inequality, automation-driven job losses, and welfare inefficiencies.

About Redraw Welfare Architecture: Place a UBI in the Centre

• What is UBI? Universal Basic Income (UBI) is a periodic, unconditional cash transfer given to all citizens, regardless of income or employment status, ensuring a minimum level of economic security.

• Universal Basic Income (UBI) is a periodic, unconditional cash transfer given to all citizens, regardless of income or employment status, ensuring a minimum level of economic security.

• Features of UBI:

• Universality: Covers all citizens without discrimination or means-testing. Unconditionality: No work requirement or eligibility conditions attached. Direct Transfer Mechanism: Uses Aadhaar-linked Direct Benefit Transfer (DBT) for efficient, corruption-free disbursal. Rights-Based Design: Recognizes income security as a citizenship right, not charity or welfare. Simplification of Welfare: Replaces fragmented, overlapping schemes with a single, streamlined safety net.

• Universality: Covers all citizens without discrimination or means-testing.

• Unconditionality: No work requirement or eligibility conditions attached.

• Direct Transfer Mechanism: Uses Aadhaar-linked Direct Benefit Transfer (DBT) for efficient, corruption-free disbursal.

• Rights-Based Design: Recognizes income security as a citizenship right, not charity or welfare.

• Simplification of Welfare: Replaces fragmented, overlapping schemes with a single, streamlined safety net.

Need for UBI in India:

• Rising Inequality: India’s wealth Gini index (75) reflects one of the highest global inequality levels; top 10% control 77% of national wealth (WID, 2023).

• Jobless Growth: Despite 8.4% GDP growth (2023–24), unemployment and informal work persist; automation may displace 69% of Indian jobs (McKinsey).

• Fragmented Welfare System: Over 400 welfare schemes face leakages and duplication (NITI Aayog, 2022); UBI offers administrative efficiency and inclusiveness.

• Social Stress: India ranks 126/137 in the World Happiness Report (2023), showing economic growth without well-being.

• Unpaid Care Work: Recognizes invisible economic contributions, particularly by women, estimated to account for 13% of India’s GDP (ILO).

Global Evidence Supporting UBI:

• India (Madhya Pradesh Pilot, SEWA 2011–13): Recipients showed better nutrition (↑25%), higher school attendance (↑12%), and small business creation (↑17%).

• Finland (2017–19): Participants reported improved mental well-being and employment stability.

• Kenya (GiveDirectly Program): Long-term UBI transfers led to 40% increase in food security and local enterprise growth.

• Iran (2011 Reform): Replaced subsidies with cash transfers, reducing poverty without inflationary effects.

Challenges Associated with UBI:

• Fiscal Burden: Implementing a UBI of ₹7,620 per person annually would cost about 5% of India’s GDP, creating pressure on public finances and necessitating restructuring of subsidies, higher taxes, or borrowing to maintain fiscal sustainability.

• Targeting Dilemma: While universality promotes inclusion, it risks benefit dilution as the rich and poor receive the same amount; thus, a phased or quasi-universal rollout is crucial to preserve redistributive justice.

• Inflation Concerns: A sudden increase in disposable income could raise local demand faster than supply, triggering price inflation in food and essential goods if not accompanied by production growth.

• Digital Divide: Inadequate banking access, poor internet connectivity, and low digital literacy in rural and tribal areas may exclude many citizens from receiving cash transfers through the DBT system.

• Political Will: Transitioning from populist, targeted subsidies to a universal rights-based income system demands strong bipartisan support, fiscal discipline, and administrative reform—often difficult in election-driven politics.

Way Ahead:

• Phased Implementation: Start with vulnerable groups—women, elderly, and informal workers—before scaling up nationwide, allowing gradual adaptation and fiscal assessment.

• Integrate with Existing Schemes: UBI should complement, not replace, essential welfare schemes like PDS and MGNREGA, ensuring food and livelihood security remain intact during the transition.

• Progressive Financing: Introduce wealth, carbon, and inheritance taxes, while cutting inefficient subsidies to create sustainable fiscal space for UBI without burdening the poor.

• Strengthen DBT Infrastructure: Upgrade the Aadhaar–Jan Dhan–Mobile (JAM) trinity, ensuring real-time transfer accuracy, grievance redressal, and digital accessibility for remote populations.

• Institutional Backing: Form an Independent Social Security Commission to assess fiscal feasibility, monitor rollout, and ensure transparency, accountability, and periodic evaluation of UBI outcomes.

Conclusion:

A Universal Basic Income can become the foundation of India’s 21st-century welfare state — simple, inclusive, and empowering. It offers a safety net amid automation, inequality, and job uncertainty, while reinforcing dignity and citizenship. The question is no longer “Can India afford UBI?” but rather “Can India afford the cost of economic insecurity without it?”