In the times of big surprises in the economic and political decisions of the country, is Universal Basic Income (UBI) the next big surprise? A series of statements by key policymakers of late seem to be indicating that.

In the Economic Survey 2016-17, the Chief Economic Advisor (CEA) Arvind Subramanian has put forward his version of a minimum universal basic income (UBI) for India, introducing UBI as an idea whose time has come to start contemplation on, if not for implementation. However, as Jean Dreze has said, UBI is not suitable for India, and especially in the form envisioned in the Economic Survey.

Discussions amongst the economists on the UBI started some years back, and with the publication of Economic Survey, it has only gathered fire. However, there is less discussion about it in public.

What is Universal Basic Income?

Universal Basic Income (UBI) is an unconditional minimum cash transfer. It is universal in the sense that it will be paid to all citizens, irrespective of their class, caste, gender, age or any other distinction; and it is unconditional because the beneficiaries are free to invest the money on anything, unlike other welfare schemes like the National Food Security Act, 2013 which is restricted to food. Its basic components are universality, unconditionality and agency (people are free to choose). It is fixed in a manner such that neither is it so high to disincentivise work nor is it so low to not be enough for basic survival.

UBI can be broadly seen as having two thematic models (there are sub-models for UBI within the below mentioned basic themes. However, for now, we will restrict ourselves only to two broad themes:

  • Thematic Model A- wherein UBI will be introduced in addition to existing welfare schemes
  • Thematic Model B- wherein UBI will be introduced in lieu of existing welfare schemes

Why is Universal Basic Income not a great idea?

The UBI, as envisaged in the Economic Survey, will be provided by scraping off the existing subsidies. This will mean that a small sum of money will be provided as a replacement of existing social security schemes like Mid Day Meal, Sarva Siksha Abhiyan, MNREGA, etc. While the success of the pilot conducted by SEWA in Madhya Pradesh is used as an argument for people wanting UBI, another experiment[1] conducted by Reetika Khera, in 2011, found out that two-third of respondents in rural areas preferred in-kind transfer of food as compared to cash. We discuss the demerits of UBI.

  1. India is a welfare state, which means that it is responsible for ensuring the social and economic well being of its citizens. With the aim of fulfilling this responsibility, a multitude of welfare schemes has been launched. If these schemes are rolled back, and only a small sum of money is provided as a replacement, then it is called cash transfer and not welfare. This will amount to India withdrawing from its responsibility of providing welfare to its citizens.
  2. All the existing welfare schemes do not have a direct objective of poverty reduction. For instance, Public Distribution System is aimed at reducing the market uncertainties for farmers and providing low-priced food to those who otherwise cannot afford it. On the other hand, markets are aimed at making profits, not ensure nutrition. Leaving everything at the mercy of the markets will make everything profit driven.
  3. There is no guarantee that the money will be spent on the welfare increasing activities. It was found that women workers in India, for their MNREGA work, preferred at least the part of the payment in food rather than cash because otherwise the money is usually spent on male priorities.[2]
  4. One argument in favour of UBI is that the existing services are facing targeting (inclusion and exclusion problems) issues, and UBI being universal in nature, will remove these issues. However, according to the Economic Survey, UBI will not be provided to everyone. It will be provided to only 75% of the population based on some exclusion criteria. This means that UBI also has some sort of targeting. Then how are we avoiding targeting issues by providing UBI? The same issues regarding targeting will come up here as well. The argument for UBI because of its better targeting doesn’t hold any ground. In such a situation, the solution is not to scrape off the entire welfare system, but to improve targeting. The economic survey 2016-17 itself admits that the targeting is improving now. If it is already improving, then it can be further enhanced as well.
  5. One trend is that parents prefer private schools over government schools because of the better quality of education. The solution to this problem would not be to give cash transfers but to improve the schooling system. Moreover, by arguing that UBI will be an improvement over the current system, the government is, in fact, acknowledging that the existing system is not functioning properly.
  6. UBI cannot be seen in isolation. It is connected to the whole idea of cashless economy, demonetisation, JAM (Jan Dhan, Aadhar and mobile), etc. People are being forced to link to the banking system. Subsidies are now directly transferred into bank accounts linked with Aadhar. Even though the UBI has not been implemented, a fertile ground is being set up.

Neither feasible nor desirable, a Universal Basic Income (UBI) will only increase the inequalities in the country. Its desirability might lie in addition to the existing social security network but definitely not as a substitute for the same. Moreover, if seen from feasibility perspective, when India has so many pressing needs concerning food security, healthcare, education, etc., it is not prudent to syphon off the money to provide UBI, which can instead be used for the former. The need of the hour is to strengthen our social security network of public distribution system, government schools and colleges, healthcare, public transport, and the like, and overcome inequality of opportunity.

If we look at the larger picture, UBI along with cash transfer is a systematic way in which government is replacing welfare with cash. Cash transfer and UBI are parts of the pie. Once the cash is introduced, the beneficiaries can purchase goods and services from the open market, which they could earlier only get from government shops. This is a perfect way in which the state is receding from providing goods and services and leaving everything to the mercy of capitalistic markets. Where is welfare in this? Can we, in all good faith, leave it to market to ensure that children don’t suffer from malnutrition or everyone has access to basic healthcare? When we leave everything on markets, we forget that markets are not aimed at providing welfare; they only exist to make profits. Today its UBI, tomorrow the government will come out with a new idea of abdicating from its responsibility.

Projection of UBI as a solution to all the poverty-related problems implies that the government is acknowledging that it has failed to and will fail to ensure that everyone has access to and affordability of essential services such as food, education and health.

(Excerpts from an upcoming publication on UBI)

[1] Khera, Reetika. “Cash vs In-Kind Transfers: Indian Data Meets theory.” Working Paper Number 325. IEG, 2013.

[2] Ghosh, Jayati. “A universal basic income in India?” Frontline, 17 02 2017.

One Comment, RSS


    Why can’t we have UBI in addition to the existing welfare systems – and further improving the welfare systems. Tax the rich sufficiently to provide for all these.

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