A modified UBI policy may be more feasible

Last Updated19/10/2024

The idea of a Universal Basic Income (UBI) is gaining renewed attention, especially in light of the challenges posed by automation, artificial intelligence, and significant youth unemployment in India.
A recent report from the International Labour Organization highlights the problem of jobless growth, where productivity increases but job creation does not keep pace, exacerbating inequality. This scenario has led to a reconsideration of UBI as part of a broader social safety net.

In India, discussions around UBI gained traction following the 2016-17 Economic Survey, which recommended exploring it as a policy option. The introduction of the JAM (Jan-Dhan, Aadhaar, Mobile) infrastructure has also facilitated the implementation of direct benefit transfers (DBTs).
However, the debate about UBI's feasibility and desirability continues, with varying perspectives on its potential effectiveness in addressing unemployment and poverty.

Critics argue that UBI may merely address the symptoms of unemployment rather than the root causes. Therefore, it should be assessed as a safety net policy. Conversely, a policy's desirability does not guarantee its feasibility, particularly concerning budget constraints. This raises the question: could a modified version of UBI be more viable?

It's essential to clarify that while India has implemented various cash transfer schemes, a true UBI is universal and not targeted. Current schemes often cater to specific demographics or conditions, such as farmers or the elderly. Evaluating safety net policies involves weighing goals like minimum consumption support against targeting vulnerable groups and managing state capacity.

India has already seen the implementation of income transfer schemes, particularly in agriculture. For instance, the Rythu Bandhu Scheme in Telangana and the Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) provide unconditional payments to farmers.
Despite their scale, these programs face challenges like inclusion and exclusion errors, suggesting that a universal approach might streamline administration and reduce leakage.

Concerns about financial feasibility are valid, as large-scale UBI proposals could require substantial funding that may necessitate cuts to existing programs or significant tax increases.
A more pragmatic approach could involve a limited universal income transfer scheme, providing around ₹144 per month per citizen (approximately ₹500 per household), akin to PM-KISAN. This could be achieved by expanding the PM-KISAN budget to include landless laborers and other vulnerable populations.

Implementing such a scheme would not be without challenges. Issues like access to cash-out points, network reliability, and biometric authentication need to be addressed to ensure effective delivery.

A modified UBI could serve as a foundational element for other transfer policies, complementing existing programs like MGNREGS, which supports employment but may exclude those unable to work. The COVID-19 pandemic has highlighted the importance of combining income and in-kind transfers to ensure resilience against supply chain disruptions.