Universal Basic Income (UBI) in India

Photo: Vishal Panchal
Universal Basic Income (UBI) in India: History, Progress, and Politics
Universal Basic Income (UBI) has been a topic of growing interest in India, driven by its potential to address poverty, inequality, and economic insecurity. While India has not implemented UBI at a national level, discussions and pilot projects have kept the idea alive in political and academic circles.
History and Context
The idea of UBI in India gained momentum in 2017 when the Economic Survey, authored by then-Chief Economic Advisor Arvind Subramanian, dedicated a chapter to exploring its feasibility. The report proposed UBI as a replacement for India’s complex subsidy and welfare systems, suggesting that direct cash transfers could be more efficient and equitable. The survey estimated that providing a basic income to 75% of India’s population would cost around 4-5% of GDP, a figure deemed manageable if certain subsidies were rationalized.
India’s welfare system, which includes programs like the Public Distribution System (PDS), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and subsidies for fuel and fertilizers, is riddled with inefficiencies and leakages. UBI was presented as a way to streamline these systems and ensure that benefits reach the intended recipients.
Test Pilots and Case Studies
India has experimented with UBI-like schemes at a smaller scale:
1. SEWA Pilot in Madhya Pradesh (2011-2012): The Self-Employed Women’s Association (SEWA), in collaboration with UNICEF, conducted a pilot project in Madhya Pradesh. Over 6,000 individuals in eight villages received unconditional cash transfers for 12-18 months. The results showed improvements in nutrition, health, school attendance, and economic activity, with beneficiaries using the funds to invest in income-generating activities.
2. Rythu Bandhu Scheme (Telangana): While not a UBI in the strictest sense, this state-level initiative provides direct income support to farmers. Launched in 2018, the scheme offers ₹5,000 per acre per season to land-owning farmers, demonstrating the feasibility of cash transfer programs.
3. NYAY Proposal by Congress (2019): During the 2019 general elections, the Indian National Congress proposed the Nyuntam Aay Yojana (NYAY), a minimum income guarantee scheme. It aimed to provide ₹72,000 annually to the poorest 20% of households. However, the proposal was not implemented after the party’s electoral defeat.
Politics and Challenges
UBI has sparked debates across political lines in India. Proponents argue that it could reduce poverty, empower marginalized groups, and simplify welfare delivery. Critics, however, point out challenges such as:
- Cost: Funding a nationwide UBI would require significant fiscal resources. Critics argue that it could strain public finances or necessitate cuts in essential services.
- Targeting vs. Universality: While universality is a key feature of UBI, targeting the most vulnerable populations might be more practical in a resource-constrained country like India.
- Behavioral Concerns: Opponents worry that unconditional cash transfers could reduce labor market participation, though evidence from pilots suggests otherwise.
Global Inspiration and Local Adaptation
India’s interest in UBI is influenced by global experiments. Countries like Finland, Kenya, and Canada have tested UBI pilots, providing valuable insights. However, India’s vast population and diversity necessitate a tailored approach.
Future Prospects
While UBI remains a distant goal for India, the idea continues to gain traction as policymakers seek innovative solutions to persistent socio-economic challenges. With technological advancements and lessons from pilot projects, India may gradually move closer to adopting a basic income framework, either universally or for targeted groups.
Latest News and Trends
- Digital Infrastructure: India’s robust digital payment systems, including Aadhaar-linked bank accounts and the Unified Payments Interface (UPI), make cash transfer programs logistically feasible.
- COVID-19 and Cash Transfers: The pandemic reignited discussions on UBI as millions of informal workers faced economic hardships. The government’s Pradhan Mantri Garib Kalyan Yojana (PMGKY) included direct cash transfers, offering a glimpse of UBI’s potential.
- Advocacy by Economists: Nobel laureates like Abhijit Banerjee and Esther Duflo have advocated for temporary basic income programs to address economic crises.
Why Cong’s universal basic income promise in Kerala is not far-fetched
The Congress, in its 2019 election manifesto, introduced the concept of Nyay, or Universal Basic Income, a concept pushed by Raghuram Rajan, former governor of the Reserve Bank of India. It did not get any traction with the electorate as the Congress lost badly as a nationalistic wave swept the country after the Pulwama attack. Rahul Gandhi, however, is persisting with the concept and built the campaign in Kerala in this election around Nyay.
> thefederal.com/analysis/how-kerala-can-implement-a-universal-basic-income-scheme
Indian state Sikkim to implement universal basic income by 2022
The Sikkim Democratic Front-led government in the northeastern state declared its intention to implement a Universal Basic Income (UBI) programme in its manifesto ahead of regional elections in 2019 and aims to implement it by 2022.
> telegraph.co.uk/news/2019/01/18/indian-state-implement-universal-basic-income-2022/
Universal Basic Income scheme might become a reality before 2019 elections in India
The Modi government is mulling over the scheme of Universal Basic Income (UBI) before the forthcoming Lok Sabha Elections.
The government is seeing UBI as a more efficient means than the one-time universal loan waiver. It is believed that UBI will help a large number of people, including small farmers, out of financial distress.
> theindianwire.com/universal-basic-income