Current Affairs 2024 - Universal Basic Income (UBI): A Policy Framework for India

The concept of UBI has the potential to address challenges such as unemployment, inequality, and inefficient welfare systems in India. However, its implementation requires a balanced analysis of arguments for and against it, as well as strategic steps toward phased implementation.

1. Structural Economic Transformation:
   • UBI can address disguised unemployment in agriculture by supporting labor transition to high-productivity sectors.
   • It could mirror East Asian economies' structural shifts, boosting economic modernization and growth.
2. Reforming Social Security:
   • Simplifies India’s fragmented welfare system by reducing exclusion errors and administrative costs.
   • Can complement targeted top-ups for vulnerabilities like old age and disability.
3. Demographic Dividend:
   • Optimizes youth potential by reducing opportunity costs for education and skill-building.
   • Supports entrepreneurship, especially in high-tech and sustainable development sectors.
4. Climate Resilience:
   • Provides financial security against climate shocks, enabling adaptive measures and "just transition" policies like carbon pricing.
5. Redefining Work:
   • Acknowledges unpaid care work, promoting gender equity and redefining productivity norms.
6. Data-Driven Governance:
   • Digital UBI payments could generate real-time data, improving evidence-based policymaking and resource allocation.
7. Global Leadership:
   • Successful UBI implementation would enhance India’s global influence in social policy innovation.
8. Alleviating Poverty:
   • Directly boosts income for the poorest, combating malnutrition and extreme poverty.
9. Fostering Entrepreneurship:
   • Provides financial security, encouraging innovation and risk-taking, especially in rural and semi-urban areas.

1. Fiscal Unsustainability:
   • UBI at 3-4.9% of GDP is financially challenging, risking higher deficits or cuts in essential spending.
2. Inflationary Pressures:
   • Large-scale cash transfers may lead to demand-pull inflation, particularly in supply-constrained sectors.
3. Labor Market Distortions:
   • Risks reducing labor participation, particularly in low-wage sectors crucial for economic growth.
4. Equity Concerns:
   • Universal transfers benefit both poor and wealthy, diverting resources from targeted developmental needs.
5. Implementation Challenges:
   • Issues in identity verification, digital infrastructure, and fraud risks complicate effective UBI rollout.
6. Opportunity Costs:
   • Diverting resources to UBI could undermine investment in healthcare, education, and infrastructure.
7. Global Competitiveness:
   • Higher wages due to UBI may reduce India's labor-cost advantage in export-driven sectors.

• United States: Alaska Permanent Fund provides $1,000–2,000 annually; Yang’s Freedom Dividend proposed $1,000/month.
• Brazil: Bolsa Família supports the poorest, enhancing nutrition and education.
• India’s Experiments: SEWA Bharat pilot in Madhya Pradesh showed positive impacts on nutrition, education, and financial autonomy.

1. Pilot Programs:
   • Conduct pilots in diverse regions to assess long-term effects, drawing from successful examples like Sikkim's UBI proposal.
2. Leverage Digital Infrastructure:
   • Utilize the JAM trinity and expand rural digital connectivity via BharatNet and DISHA initiatives.
3. Gradual Scheme Consolidation:
   • Phase out inefficient schemes like fertilizer subsidies, replacing them with direct transfers.
4. Progressive Implementation:
   • Begin with a partial or modified UBI, such as PM-KISAN expansions, before scaling up to universal coverage.
5. Social Awareness:
   • Build public consensus through stakeholder engagement, focusing on UBI’s long-term benefits for growth and equity.

UBI represents a transformative but challenging policy proposition for India. Strategic planning, phased implementation, and leveraging digital tools are essential to realize its potential as a social safety net while addressing concerns of fiscal and economic sustainability.

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