Universal Basic Income

UPSC Syllabus-GS Paper-3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Universal Basic Income.

Introduction

India faces high inequality, job risk from automation, and complex, exclusion-prone welfare. A Universal Basic Income (UBI)—an unconditional, periodic cash transfer to everyone—offers a rights-based floor. It reduces insecurity, values unpaid care, and cuts leakage through direct transfers. With digital rails in place and pilot evidence of human development gains, the task is practical: phase UBI in while protecting core public services and fixing last-mile delivery.

Universal Basic Income

It involves direct cash transfers from the government to all citizens without any conditions. This was first proposed by American revolutionary Thomas Paine and later refined by English writer Thomas Spence in 1797.

As a universal safety net, UBI will be applied to all individuals, irrespective of income and age.

The Economic Survey (2016-17) had noted that the UBI has 3 components namely:

• Universal: UBI will cover all citizens,
• Unconditional: UBI has no criteria to select the beneficiaries,
• Agency: Providing support in the form of cash transfers to respect, not dictate, recipients’ choices.

Needs for UBI

1. Inequality baseline: Wealth is highly concentrated.Top 1% owns ~40% of wealth and the top 10% ~77% (wealth Gini ~75, 2023). Such concentration risks social fracture and leaves millions near subsistence.
2. Growth–wellbeing gap: GDP grew 8.4% in 2023–24, yet India ranked 126/137 in the 2023 World Happiness Report. Output is rising, but everyday security and dignity are lagging.
3. Automation and gig risk: Gig work is volatile and protection is thin. By 2030, automation could displace up to 800 million jobs worldwide, exposing India’s semi-skilled and informal workers to sudden income loss.
4. Welfare complexity and exclusion: Targeted schemes face leakage, duplication, and missing beneficiaries. Even with Aadhaar–DBT–Jan Dhan rails, complex eligibility filters still leave eligible people out.
5. Climate and disaster risk: Heat, floods, and climate-driven displacement are growing. Households need a steady fallback when weather shocks disrupt local jobs and prices.
6. Populism trap and trust erosion: Ad-hoc freebies create short-term dependence and political bargaining. A clear, predictable baseline reduces discretionary gatekeeping and restores faith that support is a right, not a favour.

Benefits of UBI

1. Shock absorber for households: During pandemics and disasters, many rural poor became vulnerable, and the poorest went hungry. A basic deposit helps families ride out disruptions. Global conflicts can raise oil prices and inflation; a steady cash floor protects essentials.
2. Stronger citizenship: With a guaranteed floor of income, people are less dependent on ad-hoc freebies. They can judge governments on schools, rule of law, and ecological stewardship, not on one-time giveaways.
3. Valuing care: UBI recognises unpaid care work, largely done by women, and gives caregivers basic security.
4. Demand revival after layoffs: Cash in every account boosts everyday purchases. Small amounts matter—food, fees, medicines. This supports local enterprises and quickens recovery.
5. Dignity is non-negotiable: Regular, unconditional cash upholds the Right to Life (Article 21). A society that cannot assure a decent minimum fails justice. UBI meets that test without stigma.
6. Clean delivery: Universality removes stigma and forms. Cash goes straight into people’s accounts through the Aadhaar–DBT–Jan Dhan rails, making support predictable and cutting leakage and duplication.
7. People decide best: UBI is not tied to conditions. Households choose spending that fits their needs—food, schooling, mobility, or small investments. Agency improves outcomes.
8. Human development gains: Self Employed Women’s Association (SEWA)-led initiative in Madhya Pradesh (2011-13) saw better nutrition, higher school attendance, and increased earnings. Unconditional cash lets people buy food or time for care.

Challenges of UBI

1. High Financial Burden: A basic income of ₹27,620 per person annually would cost around 5% of India’s GDP. This is a big amount for any government. To fund it, India would have to either raise taxes, cut subsidies, or borrow more — all of which have their own problems.
2. Unequal Benefit Distribution: Since UBI is universal, it may also go to rich citizens who do not need it. This reduces the impact on the truly poor and weakens its purpose as a redistributive tool.
3. Digital and Access Gaps: Although Aadhaar and Jan Dhan help, many areas still lack bank access, mobile connectivity, or digital literacy. If not fixed, these gaps can exclude remote or tribal populations from receiving the benefits.
4. Risk of Replacing Key Welfare Schemes: There is a concern that UBI might replace existing schemes like PDS or MGNREGA, which are still essential for many.
5. Not a cure-all: UBI does not itself create jobs or fix health and education. It is a base layer, not a substitute for public services or sectoral reforms.
6. Improper Human behavior: Recipients might misuse the money they receive and undermine social security objectives. Further UBI will induce people to work less or create a disincentive to work. Although, the opinion of economists is divided here.

Way Forward

1. Phase-wise rollout with learning loops: Begin with women, elderly, persons with disabilities, and low-income workers. Use phased pilots to test amounts, frequency, and delivery. Continuously evaluate impacts on nutrition, schooling, and work outcomes.
2. Phase-wise rollout with learning loops: In early stages, retain PDS and MGNREGA in vulnerable regions. Layer UBI to avoid food insecurity or job shocks during transition. Align with local price and labour conditions.
3. Fund prudently: Pursue measured subsidy rationalisation, improved tax capacity, and cleaner program consolidation. Reduce duplication to free fiscal space while maintaining core public goods.
4. Close the digital and banking gap: Invest in connectivity, simple user interfaces, grievance redress, and doorstep support. Build robust audit trails to minimize leakage and exclusion.
5. Invest in Jobs, Education, and Equity: UBI must be backed by long-term investment in education, skill-building, and job creation. Guaranteed income without opportunity will not reduce poverty in the long run.

Conclusion

UBI is not a panacea, but it is a strong base of income security in an era of inequality, automation, and climate stress. Evidence shows human-development gains without eroding work incentives. Fiscal design, phased rollout, and inclusion safeguards are essential. Done carefully, UBI can reduce poverty, ease precarity, value unpaid care, and strengthen democratic citizenship by replacing patronage with a universal, dignified right.

For detailed information on Universal Basic Income: Benefits and Challenges read this article here

Question for practice:

Examine the need for Universal Basic Income (UBI) in India, its key benefits, major challenges, and a practical way forward.

Source: The Hindu