Editorial 1: A modified UBI policy may be more feasible

Context

As a core issue is financial feasibility, what may work best in India is using a modified policy as a base to which other transfer policies can be added as and when appropriate.

Introduction

The idea of a Universal Basic Income (UBI) keeps surfacing from time to time. A recent report by the International Labour Organization talks about how jobs growth has been lagging globally due to automation and Artificial Intelligence, and notes the massive problem of youth unemployment in India. The phenomenon of jobless growth, where productivity rises but job creation lags and contributes to the alarming trend in inequality, has rekindled interest in a UBI as a component of a social safety net across the world. 

Universal Basic Income (UBI) in India

• There was a fair bit of discussion surrounding UBI in India a few years ago.
• Debates: with scholars and policymakers debating whether it is worth replacing some inefficient welfare schemes with direct income transfers to the poor.
• Recommendation by economic survey: The idea gained significant attention after the 2016-17 Economic Survey of India recommended considering UBI as a potential policy.
• Feasibility of investments: It was argued that investments in the JAM (Jan-Dhan, Aadhaar, Mobile) infrastructure have also made it feasible to implement direct benefit transfers (DBTs) to beneficiary bank accounts. 

 

A UBI and modifications

• The key question: Should India adopt some version of UBI to deal with challenges related to unemployment and poverty
• Policy Debate:  a policy can be debated in terms of feasibility and desirability.
  • Something that is feasible may not be the most desirable policy as one may have different policy priorities.
• Valid points in critique: The argument that we should have policies to boost employment growth or deal with the slack demand for mass consumption goods that comes with rising unemployment or that we need universal basic services are all valid points.
• Positions on UBI: But as critiques of a UBI, they are misplaced, as at best, it is a policy to help people cope with the consequences of unemployment.
  • Policies need to be evaluated with respect to the specific problems that they are designed to address, which in turn correspond to specific social objectives.
  • For example, investing in better transportation is a great policy to improve productivity and mobility, but it is not fair to criticise it as it will not directly deal with poverty.
  • So, a UBI should be evaluated as a safety net policy. 
• Feasibility concerns: At the same time, something that is desirable may not be feasible from a budgetary point of view.
  • Even if one were to agree that a UBI is indeed desirable as a social safety net policy, it may not be feasible given budgetary constraints.
• Terminological confusion prevails: It might appear that some forms of a UBI already exist in India, such as cash transfer schemes for farmers and women.
  • While these are cash transfer schemes, a UBI, by definition, must be universal, i.e., not targeted to any specific group.

Comparison of UBI  with other Safety Net Policies

• A comparison with other forms of safety net policies is fair, and indeed necessary.
• These could be policies that are targeted to specific demographic groups such as women or the elderly,
  • or those that are contingent on certain socio-economic criteria being met (farmers, the unemployed, the poor), or
  • those that are in-kind rather than cash (the Public Distribution System) or
  • those that are conditional on being willing to work (Mahatma Gandhi National Rural Employment Guarantee Scheme or MGNREGS) or
  • sending children to school (mid-day meals). 

What are the Budget Considerations?

• For a given budget devoted to direct transfer schemes or social safety net policies, the choices are determined by various considerations.
• Is the goal to provide a safety net or minimum consumption support or long-term poverty alleviation?
• Are certain groups more vulnerable and require more assistance?
• Is it a remote rural area where in-kind assistance would be more helpful to the poor?
• Does limited state capacity mean inclusion and exclusion errors make means-tested programmes not very effective to target the poor?
• In addition, be subject to bureaucratic delays, glitches and corruption? 

State and central schemes

In recent years, India has already implemented income transfer schemes as part of its anti-poverty strategies, especially in the agriculture sector.

• Rythu Bandhu Scheme (RBS): which gave farmers unconditional payments of ₹4,000 per acre.
• KALIA: This approach was soon replicated at both the State level (the KALIA or Krushak Assistance for Livelihood and Income Augmentation programme in Odisha), and
• At the national level (the Pradhan Mantri Kisan Samman Nidhi Yojana, or PM-KISAN).
  • The PM-KISAN, of 2018-19, initially provided ₹6,000 per year to small landholding farmers,
  • but was later expanded to cover all farmers, excluding income-taxpayers and those not engaged in farming.
  • By 2020-21, the scheme aimed to cover around 10 crore farming households,
  • with an estimated cost of ₹75,000 crore, roughly 0.4% of GDP. 

What are the associate challenges?

• Despite the programme’s scale and relative success, issues such as
  • inclusion and exclusion errors persist,
  • mainly due to logistical challenges such as Aadhaar verification and rejections by banks.
  • It is to overcome limitations such as these that the proposal to make them universal, covering all citizens, has been proposed. 

What are the advantages of Universal Income Transfers?

Universal income transfers offer several advantages.

• They reduce administrative costs associated with targeting and minimise exclusion errors.
• Since the transfers are universal, fewer intermediaries are involved, lowering the chances of leakage.
• Universal transfers also avoid work disincentives often associated with targeted programmes. 

What are the common objections?

• A common reaction to such a proposal is to question why the wealthy should also receive a basic income.
• However, this viewpoint misunderstands how tax and benefit systems operate.
• In any advanced economy, individuals pay taxes and receive some form of government support, such as child benefits, depending on their circumstances.
• What ultimately matters is their net income.
•  Similarly, wealthier individuals would pay far more in taxes than the amount they would receive from a UBI. 

A possible scheme

• Financial concerns: However, where the case against a UBI scheme in India has validity is financial feasibility.
  • UBI proposals often suggest large transfers, amounting to 3.5%-11% of GDP, which would either require cutting other anti-poverty programmes or drastically raising taxes.
• Proposal of alternatives: A more feasible approach would be to adopt a limited universal income transfer scheme.
  • explored such a policy that is pegged at 1% of GDP per capita.
• Details of the proposed scheme: This would provide approximately ₹144 per month to every citizen (or roughly ₹500 a month a household), which works out to be similar to that of PM-KISAN.
  • It can be implemented simply by roughly doubling the budget for PM-KISAN and making it universal,
  • which means it would reach not only farmers but also landless labourers, who are often poorer.
  • If one thinks the amount is too little, recall that the Tendulkar poverty line, at 2022-23 prices is around ₹1,500 a month in rural areas and ₹1,850 in urban areas — or an average of ₹1,600. 
• Key Implementation Advantages: This approach could also simplify implementation by reducing eligibility verification costs.

• Logistical challenges such as ensuring access to cash-out points (COPs), minimising network and biometric authentication failures, and addressing issues with electronic payment devices.
• The last-mile delivery problems need to be addressed to ensure the success of universal income transfers in India. 

Conclusion

Given the fiscal constraints that State and central governments face, it is natural to be sceptical of new policies when other policies that are somewhat similar are already in place. But in my view, having a modified UBI policy, as described above, as a base to which other transfer policies can be added, as and when appropriate (targeted at women), and feasible is a good model. For example, the MGNREGS provides 100 days of employment but may exclude those unable to work, such as the elderly or the disabled. Combining MGNREGS with a modified UBI scheme could ensure comprehensive coverage for different vulnerable groups. The COVID-19 pandemic underscored the point that income and in-kind transfers are complementary. For example, income is critical during supply chain disruptions, and food access is essential when people lack purchasing power.

Editorial 2: India’s SDG focus and its human development issues

Context

Countries that aspire to achieve sustainable development need to take steps to boost human development

Introduction

On September 9-10, 2023, New Delhi hosted the G-20 Summit, which resolved to accelerate the full and effective implementation of the UN Agenda 2030 for Sustainable Development. On September 18-19, 2023, an “SDG Summit” was convened at the United Nations headquarters to follow up and review the implementation of the Agenda and the progress of the 17 Sustainable Development Goals (SDGs). A “Summit of the Future” took place on September 22-23, 2024, at the UN headquarters to build upon the SDG Summit 2023 and its commitments by member nations.

• Examining India’s progress: in human development since 1990, based on the UNDP’s latest Human Development Report (HDR), is valid.
• Amartya Sen’s Perspective on Development: As said by Nobel laureate Amartya Sen in his book, Development as Freedom, ‘development is a process of expanding the real freedoms that people enjoy’.
• In his ‘capability approach’: the basic concern of human development is ‘our capability to lead the kind of lives we have reason to value’.
• Key Elements of Human Development
  • Freedom from hunger and ill-health on the one hand and
  • gender and income equality, and
  • access to quality education on the other hand lead to the achievement of human development, and,
  • consequently, to sustainable development. 

 

Development and the SDGs 

• The Human Development Index (HDI) developed by the UNDP has three dimensions:
  • long and healthy life (measured by life expectancy at birth);
  • knowledge (expected years of schooling and mean years of schooling), and
  • a decent standard of living (income per capita).
• Relation with SDG: All the three dimensions are much related to some of the key SDGs:
  •  SDG-3 (good health);
  • SDG-4 (quality education);
  •  SDG-5 (gender equality);
  • SDG-8 (decent work) and
  • SDG-10 (reduced inequality).
  • Clearly, countries aspiring to achieve sustainable development need to take appropriate measures to boost human development. 
• India’s Human Development Ranking (HDR 2023-24): The HDR 2023-24 places India in the ‘medium human development category’ with a human development index (HDI) value of 0.644.
  • India ranks 134 out of 193 countries.
  • The HDI value was stagnant in 2019-20, at 0.638, and fell to 0.633 in 2021. It improved to 0.644 in 2022.
  • In this report, some of India’s neighbouring countries have better HDI ranks — Malaysia (63); Thailand (66); China (75); Sri Lanka (78); Indonesia (112); Bhutan (125), and Bangladesh (129).

India’s HDI Growth (1990-2022)

• The HDR also presents interpolated consistent data which can be used to compare HDI values across years and countries.
• India saw its HDI value increase by 48.4%, from 0.434 in 1990 to 0.644 in 2022.
• As for HDI rankings, during 2015-2022, India improved by four ranks, while neighbouring countries such as Bangladesh and Bhutan improved by 12 and 10 ranks, respectively.
• China improved by 18 ranks. India’s human development initiatives lagged behind during 2015-22.
• One of the reasons for the slow growth is the COVID-19 pandemic and its impact on dimensions of human development such as education and income. 

Gender gaps 

• Gender Development Index (GDI): The HDR also presents the Gender Development Index (GDI) for 193 countries.
  • It measures disparities in human development by gender.
  • The report contains HDI values estimated separately for women and men, the ratio of which is the GDI value.
  • The closer the ratio is to one, the lesser the gap there is between women and men. 
• Gender disparity in Medium Human Development countries: Among the 42 ‘medium human development countries’ to which India belongs, there are only seven with low equality in HDI achievements between women and men.
  • These countries, with absolute deviation from gender parity of more than 10%, are India, Bangladesh, Nepal, Uganda, Morocco, the Syrian Arab Republic, and Kiribati. 
• Labour Force Participation Rate (LFPR) Gap: India has one of the largest gender gaps in the Labour Force Participation Rate (LFPR) a 47.8 percent points difference between women (28.3%) and men (76.1%).
  • Female labour force participation rate in India is very low when compared to many countries, more so when one compares it with India’s neighbouring countries where in China it is 53.6 %, Bhutan 53.5 %, and Bangladesh 39.2%. 
• Periodic Labour Force Survey (PLFS) 2022-23: In the latest Periodic Labour Force Survey (PLFS)-2022-23, published by the Ministry of Statistics and Program Implementation, around 37% females of working age (15 years and above) were in the labour force in 2022-23; it was 23.3% in 2017-18.
• Rural and Urban LFPR Disparity: However, there is a huge gap in female labour force participation in rural and urban areas.
  • While the female labour force participation rate in rural areas increased from 24.6% in 2017-18 to 41.5% in 2022-23, there is only a marginal increase in urban areas (from 20.4% to 25.4%).
  • This is a matter of concern that requires further research and in-depth study aimed at feasible policy initiatives.

Conclusion: Income inequality

In addition to the gender gap in income, inequality of incomes is also on the rise. India is one of the countries where income shares held by the richest 1% is very high (21.7%) compared to Bangladesh (11.6%), China (15.7%), Bhutan (18.1%), and Nepal (9.7%). Income inequality in India is also higher than the world average of 17.5% and the South Asia average of 19.6%. Most importantly, income inequality is also higher than other regional groups such as East Asia and the Pacific (16.5%) and Europe and Central Asia (15.7%). India needs to address these gender development issues and increasing inequality in order to achieve the SDGs.