Answer

The concept of a Modified Universal Basic Income (UBI) in India has gained renewed attention amid concerns of job stagnation, automation, and rising unemployment, particularly among the youth. The 2016-17 Economic Survey introduced UBI as a replacement for inefficient welfare schemes, utilising India’s robust JAM (Jan-Dhan, Aadhaar, Mobile) infrastructure to facilitate direct benefit transfers. Recent global challenges further stress the need to ensure economic security for all.

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Feasibility of Implementing a Modified UBI

• Fiscal Feasibility: Implementing UBI on a large scale requires substantial budgetary allocation. While a modified UBI could be limited to a small percentage of GDP, it would still require diverting funds from existing welfare programs.
  For example: PM-KISAN scheme costs approximately ₹75,000 crore annually.
• Infrastructure Readiness: India’s JAM infrastructure supports direct transfers, reducing administrative burdens. However, gaps in financial inclusion and access to banking in remote areas pose hurdles for effective UBI implementation.
  For example: According to the Economic Survey, over 80% of adults now have a Jan-Dhan account.
• Political Will: Implementing UBI requires strong political commitment, but balancing UBI with other popular welfare schemes can be politically sensitive.
• Targeting Efficiency: UBI avoids the targeting issues seen in current welfare programs, reducing exclusion errors. However, critics argue that wealthy individuals receiving UBI would reduce the scheme’s overall efficiency.
  For example: The Rythu Bandhu Scheme in Telangana, though effective, covers farmers indiscriminately, including wealthy landholders.
• Impact on Existing Programs: A UBI could undermine or replace existing welfare programs, such as MGNREGA or the Public Distribution System, which are targeted at specific vulnerable populations.
  For example: MGNREGA provides employment-based support to rural households.
• Inflationary Pressures: Providing cash directly to a large population could lead to inflation, as increased demand for goods outpaces supply. This is especially true in rural areas with limited market access.
• Administrative and Technical Challenges: The effective implementation of UBI requires reliable payment mechanisms and minimal transaction failures. Infrastructure gaps, particularly in remote areas, remain a concern.
  For example: Aadhaar-based payment systems have faced technical glitches in several regions, limiting access.

Potential Positive Impact of UBI

• Poverty Alleviation: A modified UBI could directly address poverty by providing a stable income source, lifting vulnerable populations above the poverty line.
  For example: PM-KISAN helped stabilise incomes for small farmers during the pandemic, reducing distress.
• Reduction in Inequality: UBI promotes financial equity by ensuring a minimum income for all, reducing income inequality and fostering social cohesion.
  For example: Finland’s UBI trial showed improved economic security and well-being.
• Economic Stimulus: By boosting purchasing power, UBI can stimulate demand, leading to economic growth, especially in rural and underdeveloped regions.
  For example: The National Rural Employment Guarantee Act (NREGA) has shown the potential of cash transfers in boosting rural demand.
• Elimination of Corruption: Direct transfers minimise the involvement of intermediaries, reducing corruption and leakages in welfare schemes.
  For example: The JAM trinity has significantly reduced leakages in India’s subsidy programs.
• Social Empowerment: UBI enhances individual autonomy, allowing people to make choices that improve their quality of life, such as investing in education or healthcare.
  For example: Cash transfers in DBT (Direct Benefit Transfer) schemes have shown improvements in individual decision-making.
• Mitigating Job Losses from Automation: As automation reduces employment opportunities, UBI can provide a safety net for displaced workers, ensuring they maintain a basic standard of living.
  For example: The ILO reports that global job growth is stagnating due to technological advancements.
• Reduced Dependence on Debt: UBI can reduce the need for informal loans or exploitative credit, especially in rural areas, helping families avoid debt traps.
  For example: Many rural households depend on high-interest loans for basic needs, which could be offset by UBI.

Potential Negative Impact of UBI

• High Fiscal Burden: Implementing UBI at scale may lead to increased public debt or cuts in essential services, straining fiscal resources.
  For example: A nationwide UBI could cost trillions, requiring significant financial reallocation.
• Work Disincentives: Critics argue that UBI might reduce motivation to seek employment, potentially leading to a decline in labour participation.
• Overlapping with Existing Schemes: UBI could create redundancies with current welfare schemes, reducing the overall efficiency of poverty alleviation efforts.
• Risk of Inflation: Mass distribution of income could inflate prices, especially in areas with poor infrastructure, leading to diminished purchasing power.
  For example: Cash transfers during COVID-19 in some areas led to inflationary pressures.
• Targeting the Wrong Beneficiaries: UBI’s universal nature means even wealthy individuals benefit, diluting the effectiveness of poverty-focused welfare programs.
  For example: Concerns about including wealthy recipients persist, as seen in various social schemes.

Complementing Existing Welfare Programs

• Strengthening Cash Transfer Programs: UBI can complement PM-KISAN and other DBT schemes by providing a stable income floor, helping ensure no gaps in support.
  For example: PM-KISAN offers regular transfers to farmers, which could be expanded under UBI.
• Reducing Bureaucratic Inefficiencies: By reducing the administrative burden of targeted welfare schemes, UBI can streamline the welfare process.
  For example: The Public Distribution System has long faced issues of corruption and inefficiency.
• Addressing Health and Nutrition: UBI can complement existing nutrition programs, helping families access better healthcare and nutrition, particularly through schemes like ICDS.
  For instance: UBI could enhance food security alongside PDS.
• Expanding Access to Employment Programs: UBI could work alongside MGNREGA, providing additional financial support while enabling people to choose flexible employment options.
  For instance: MGNREGA’s wage-based employment can be complemented by UBI’s unconditional support.
• Filling Gaps in Welfare Coverage: UBI can serve as a universal safety net, ensuring that vulnerable populations not covered by existing schemes receive support.
  For instance: Many informal workers are not covered under welfare programs like ESIC, leaving gaps.

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Measures for Effective Implementation

• Strengthening JAM Infrastructure: Expanding the JAM trinity to cover remote areas ensures effective delivery of UBI through direct transfers.
  For example: Financial inclusion efforts under PM Jan Dhan Yojana need to reach all households.
• Reducing Technical Failures: Addressing system glitches in Aadhaar-based transfers and ensuring smooth functionality of payment mechanisms is crucial.
• Developing Robust Grievance Mechanisms: A well-established grievance redressal system is vital for addressing issues like non-receipt of payments or exclusion errors.
  For example: MGNREGA has grievance redressal mechanisms that could be adapted for UBI.
• Collaboration with States: State governments must actively participate in UBI implementation, ensuring regional needs are addressed.
  For example: Coordination in welfare delivery between central and state schemes has been effective in programs like Ayushman Bharat.
• Pilot Programs for Refinement: Launching UBI pilots in specific regions can help identify challenges and refine the implementation process.
  For example: Several countries, including Finland, have experimented with UBI pilots to understand its effectiveness.

A modified UBI scheme holds the potential to address poverty, reduce inequality, and complement existing welfare programs. However, its successful implementation requires overcoming fiscal constraints, infrastructure gaps, and administrative hurdles. By carefully balancing UBI with targeted interventions and enhancing last-mile delivery, India can create a robust and inclusive social safety net.

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