Modified UBI may be more practical

Universal Basic Income (UBI) and its Implications in India

• The International Labour Organization reports a global trend of jobless growth due to automation and AI, particularly in India.
• The idea of a Universal Basic Income (UBI) has been discussed in India, with scholars and policymakers questioning its potential to replace inefficient welfare schemes with direct income transfers to the poor.
• The 2016-17 Economic Survey of India recommended considering UBI as a potential policy, citing investments in the Jan-Dhan, Aadhaar, Mobile (JAM) infrastructure.
• Critiques of a UBI are misplaced as it is a policy to help people cope with unemployment consequences.
• Policies should be evaluated based on the specific problems they address, which correspond to specific social objectives.
• A UBI should be evaluated as a safety net policy, not a policy to boost employment growth or deal with the slack demand for mass consumption goods.
• The real question is whether a modified and less ambitious version of a UBI is worth exploring.
• Some forms of a UBI already exist in India, such as cash transfer schemes for farmers and women, but a UBI must be universal.
• The choice of direct transfer schemes or social safety net policies is determined by various considerations, including the goal to provide a safety net, the vulnerability of certain groups, the remote rural area, and the potential for bureaucratic delays and corruption.

India’s Income Transfer Schemes and Their Impact on Poverty

State and Central Schemes
• India has implemented income transfer schemes, particularly in the agriculture sector, to combat poverty.
• The Rythu Bandhu Scheme (RBS) in Telangana in 2018 provided farmers with unconditional payments of ₹4,000 per acre.
• The KALIA program in Odisha and the Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) in 2018-19 expanded to cover all farmers, excluding incometaxpayers and non-farmers.
• By 2020-21, the PM-KISAN aimed to cover around 10 crore farming households, costing approximately 0.4% of GDP.

Issues with the Schemes
• Issues such as inclusion and exclusion errors persist due to logistical challenges like Aadhaar verification and bank rejections.
• A proposal to make these schemes universal, covering all citizens, has been proposed to overcome these limitations.

Advantages of Universal Income Transfers
• Reduces administrative costs associated with targeting and minimises exclusion errors.
• Lowers the chances of leakage and avoids work disincentives.
• Wealthier individuals would pay more in taxes than the amount they would receive from a UBI scheme.

Potential Scheme
• A limited universal income transfer scheme pegged at 1% of GDP per capita could be a more feasible approach.
• This would provide approximately ₹144 per month to every citizen, similar to PM-KISAN.
• This approach could simplify implementation by reducing eligibility verification costs.
• Logistical challenges such as access to cash-out points, network and biometric authentication failures, and issues with electronic payment devices need to be addressed.
• A modified UBI policy as a base for other transfer policies could ensure comprehensive coverage for different vulnerable groups.