Syllabus
GS Paper 3 – Growth, Development and employment.
Context
As a core issue is financial feasibility, what may work best in India is using a modified policy as a base to which other transfer policies can be added as and when appropriate.
Source
The Hindu| Editorial dated 18th October 2024
A modified UBI policy may be more feasible
The concept of Universal Basic Income (UBI) has gained attention in recent years, particularly in the context of rising automation, artificial intelligence, and global jobless growth. In India, UBI has resurfaced in policy debates as a potential solution to issues such as unemployment and poverty. However, concerns about its feasibility and desirability persist. This discussion evaluates UBI as a social safety net and explores a possible modified version suited to India’s needs.
Rationale for Universal Basic Income (UBI)
- Jobless Growth: Global economic trends, driven by automation and AI, have resulted in rising productivity but slow job creation, leading to unemployment and inequality.
- Youth Unemployment: India faces a significant challenge of youth unemployment, making UBI a potential tool to address the economic pressures faced by young people.
- Social Safety Net: UBI could serve as a safety net to protect people from the negative effects of job losses and lack of economic opportunities, providing a minimum income for all.
UBI in the Indian Context
- Policy Debate: UBI gained prominence in India after the 2016-17 Economic Survey recommended considering it as a solution to inefficient welfare schemes and growing inequality.
- JAM Infrastructure: Investments in Jan-Dhan, Aadhaar, and Mobile (JAM) infrastructure have made direct benefit transfers (DBTs) more feasible, paving the way for UBI implementation.
- Targeted Welfare vs. UBI: While India has various welfare schemes like PM-KISAN and MGNREGS , these are targeted, conditional, or in-kind, whereas UBI is universal and unconditional.
Advantages of UBI
- Universal Coverage: UBI eliminates the need for complex eligibility criteria, reducing administrative costs and minimising exclusion errors.
- Lowering Leakages: Since UBI involves fewer intermediaries, it can reduce corruption and improve the efficiency of cash transfers.
- Avoiding Work Disincentives: UBI does not penalise people for working, unlike some targeted schemes, which can disincentivise recipients from seeking employment.
Challenges of UBI
- Financial Feasibility: Implementing UBI on a large scale in India could cost 3.5%-11% of GDP, making it difficult to sustain without cutting other welfare programmes or increasing taxes.
- Inclusion of the Wealthy: Critics argue that UBI would provide unnecessary benefits to the wealthy, but this concern is mitigated by the fact that wealthier individuals would pay more in taxes than they receive from UBI.
- Logistical Challenges: Issues such as Aadhaar verification, biometric failures, and lack of access to cash-out points (COPs) could hinder the smooth implementation of UBI.
Existing Income Transfer Schemes
- Rythu Bandhu Scheme (RBS): Launched by Telangana, this scheme provides unconditional payments to farmers, serving as an example of income transfers in agriculture.
- PM-KISAN: The Pradhan Mantri Kisan Samman Nidhi Yojana offers ₹6,000 per year to farmers, addressing their financial needs, but faces issues of exclusion and inclusion errors.
- KALIA Scheme: Odisha’s KALIA programme provides financial support to farmers and has been seen as a model for targeted income transfers at the state level.
Modified UBI Proposal
- 1% of GDP Approach: A modified UBI, pegged at 1% of GDP, could provide around ₹144 per person per month, similar to PM-KISAN, but with universal coverage, including landless labourers.
- Complementary to Existing Schemes: A modified UBI could complement schemes like MGNREGS, which provides employment but excludes those unable to work, such as the elderly or disabled.
- Cost and Implementation: By doubling the PM-KISAN budget and making it universal, a modest UBI could be introduced without overwhelming financial costs, while addressing logistical challenges related to payments.
Feasibility of UBI in India
- Budgetary Constraints: Implementing a large-scale UBI would require significant financial resources, potentially impacting other anti-poverty programmes or necessitating tax hikes.
- Combining UBI with Other Schemes: A hybrid approach that combines a modest UBI with targeted schemes for vulnerable groups could ensure comprehensive coverage without excessive costs.
- Income and In-Kind Transfers: The COVID-19 pandemic demonstrated the importance of combining income transfers with in-kind support, such as food distribution, to address different aspects of poverty.
Conclusion
Universal Basic Income presents a promising solution to tackle unemployment and poverty in India, particularly in the context of rising automation and inequality. While a large-scale UBI may be financially unfeasible, a modified version could complement existing welfare schemes and provide a safety net for all. To make UBI a reality, careful consideration must be given to budgetary constraints, implementation logistics, and integration with other social safety net policies.
Related PYQ
Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements? [ UPSC Civil Services Exam – Mains 2023]
Practice Question
Discuss the feasibility and potential benefits of implementing a Universal Basic Income (UBI) in India. Highlight the challenges and suggest possible solutions for its effective implementation? [250 words]
Guidelines for Answering the Question
- Introduction:
- Briefly define Universal Basic Income (UBI).
- Mention its relevance in the Indian context, considering unemployment, poverty, and jobless growth.
- Body:
- Discuss how UBI can provide financial security and reduce poverty.Highlight the simplification of existing welfare schemes through UBI.
- Explain UBI’s potential in reducing inequality and promoting economic empowerment.
- Highlight the importance of strengthening digital infrastructure (JAM) to ensure efficient implementation.
- Conclusion:
- Summarize the potential benefits and challenges of UBI.
- Emphasize the importance of phased and well-planned implementation to achieve sustainable success.