[Answered] “Universal Basic Income (UBI) has emerged as a potential solution to mitigate poverty and inequality. Evaluate the feasibility of implementing a modified UBI in India, considering the existing economic constraints.” (250 words).

The idea of Universal Basic Income (UBI) as a solution to poverty and inequality has gained traction in India, especially after its recommendation in the 2016-17 Economic Survey. UBI proposes a guaranteed income to all citizens, regardless of their socio-economic status, as a safety net against unemployment, poverty, and inequality.

Feasibility of Implementing a Modified UBI

• Financial Constraints: A full-fledged UBI, with substantial cash transfers to every citizen, would demand significant resources. Estimates suggest it could cost between 3.5% to 11% of India’s GDP, a financial burden that is currently unfeasible given India’s fiscal constraints.
• JAM Infrastructure for Implementation: The successful implementation of direct benefit transfer (DBT) schemes, such as PM-KISAN, is made possible by the JAM (Jan Dhan, Aadhaar, Mobile) infrastructure, which allows for cash transfers directly to beneficiaries. However, there are challenges with Aadhaar verification and inclusion/exclusion errors.
• Addressing Existing Inefficiencies: India’s existing welfare schemes are numerous, often overlapping, and subject to inefficiencies. In-kind assistance (such as the Public Distribution System) or targeted schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) have helped many, but issues of corruption, delays, and mismanagement persist. A UBI, which is unconditional and universal, could minimize bureaucratic hurdles, ensuring that the most vulnerable receive assistance without delay or error.
• Targeted vs. Universal Approach: Many argue against UBI’s universal nature, questioning why the wealthy should receive payments. However, proponents clarify that what matters is net income. The wealthy would pay more in taxes than they receive, effectively redistributing wealth. This would simplify administration compared to targeted schemes, which are prone to errors of inclusion (benefitting the non-poor) and exclusion (missing the deserving poor).
• Logistical Challenges and Last-Mile Delivery: For UBI to be effective, last-mile challenges such as access to cash-out points, network failures, and biometric authentication issues must be resolved. This aspect underscores the importance of improving financial inclusion infrastructure alongside UBI implementation.
• Complementing Existing Schemes: A modified UBI, instead of replacing existing welfare schemes, could work alongside programs like MGNREGS, which provide work opportunities but exclude those unable to work, such as the elderly or disabled. Similarly, schemes targeting specific vulnerable groups, such as women or children, could be layered on top of UBI to create a comprehensive social safety net. This layered approach could help balance fiscal sustainability with the need for targeted welfare.

Conclusion

A gradual, phased approach to UBI, starting with limited transfers, would allow for adjustments as fiscal space and implementation capacity improve.