UPSC Editorial Analysis: Universal Basic Income (UBI) in India
Kartavya Desk Staff
*General Studies-3; Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.*
Introduction
• The International Labour Organization (ILO) has raised concerns about jobless growth, a trend exacerbated by automation and Artificial Intelligence (AI).
• Rising income inequality and unemployment in India have renewed discussions on Universal Basic Income (UBI) as a possible social safety net.
Background and Evolution of UBI in India
• UBI gained traction after the 2016-17 Economic Survey, which proposed its adoption as an alternative to inefficient welfare programs.
• The advancement of the JAM (Jan-Dhan, Aadhaar, Mobile) infrastructure has improved the feasibility of Direct Benefit Transfers (DBTs), a key mechanism for UBI implementation.
UBI as a Social Safety Net
• UBI should be seen as a social protection mechanism, rather than a solution for employment generation or economic development.
• It ensures financial security for the vulnerable but does not directly address structural unemployment or economic stagnation.
Key Benefits of UBI
• Poverty Alleviation – Direct cash transfers provide a minimum income floor, helping the poor secure basic needs.
• Reduced Bureaucracy & Leakages – Universal transfers reduce intermediaries, lowering administrative costs and exclusion errors.
• Boost in Demand & Economic Growth – Increased purchasing power can stimulate consumption, particularly in economic downturns.
• Support for Vulnerable Groups – Provides financial stability for the elderly, disabled, and unemployed, who are often excluded from work-based welfare schemes.
• Human Capital Development – Guaranteed income encourages investment in education and healthcare, improving long-term development indicators.
• Mental Well-Being & Crime Reduction – Reducing financial insecurity may lower stress levels and crime rates, promoting social stability.
Feasibility vs. Desirability of UBI
• Feasibility Concern – India faces budgetary constraints, making full-scale UBI financially challenging.
• Desirability Aspect – UBI is desirable as a universal income support mechanism that can reduce inequality and offer a minimal consumption guarantee.
• A modified or targeted UBI could be explored to balance affordability and effectiveness.
Existing State and Central Cash Transfer Schemes
• State Initiatives: Rythu Bandhu (Telangana) – Unconditional financial aid to farmers. KALIA (Odisha) – Direct support to small and marginal farmers.
• Rythu Bandhu (Telangana) – Unconditional financial aid to farmers.
• KALIA (Odisha) – Direct support to small and marginal farmers.
• Central Initiative: PM-KISAN – ₹6,000 per year for farmers, targeting 10 crore agricultural households.
• PM-KISAN – ₹6,000 per year for farmers, targeting 10 crore agricultural households.
• Challenges: Inclusion and exclusion errors due to logistical hurdles (e.g., Aadhaar authentication failures, banking issues).
Financial Viability of UBI in India
• Large-scale UBI models suggest costs ranging from 3.5% to 11% of GDP, necessitating either: Reallocation of funds from existing welfare programs, or Increased taxation or fiscal deficit expansion.
• Reallocation of funds from existing welfare programs, or
• Increased taxation or fiscal deficit expansion.
• A limited UBI pegged at 1% of GDP could provide approximately ₹144 per month per individual, which, though small, could be gradually expanded.
Key Challenges in Implementing UBI
• High Fiscal Burden – Providing universal income is costly, and financing options remain unclear.
• Replacement of Welfare Programs – Replacing PDS or MGNREGS with UBI could hurt the most vulnerable populations.
• Inflationary Risks – Cash transfers could drive inflation, particularly in rural areas where supply constraints
• Work Disincentive – Concerns that assured income might discourage people from participating in the labor force.
• Technological & Logistical Barriers – Biometric failures and banking infrastructure gaps could exclude beneficiaries, as seen in schemes like PM-KISAN.
• No Long-Term Structural Impact – While UBI addresses immediate poverty, it does not resolve fundamental issues like education, healthcare, and job creation.
Way Forward
• Targeted Implementation – A full-scale UBI may not be feasible; a gradual rollout for vulnerable groups (e.g., women, elderly, disabled, landless laborers) is more practical.
• Integration with Existing Welfare Schemes – Instead of replacing MGNREGS and PDS, UBI should complement these programs for a more inclusive safety net.
• Leveraging JAM Infrastructure – Strengthening Aadhaar-linked bank transfers and improving rural banking access will ensure efficient distribution.
• Combining UBI with Job Creation Policies – UBI alone cannot resolve unemployment; it must be paired with industrial and skill-development policies.
Conclusion
• UBI has strong potential to reduce poverty and inequality, but its large-scale implementation is financially challenging.
• A modified and phased UBI, in combination with existing social welfare programs, could provide a balanced approach, ensuring economic security without excessive fiscal pressure.
Practice Question:
Universal Basic Income (UBI) has often been seen as a potential solution to address rising inequality and jobless growth in India. Discuss the relevance of UBI in the context of global trends like automation and Artificial Intelligence. How can UBI contribute to India’s social safety net? (250 words)