Universal basic income plan faces implementation issues : Daily Current Affairs

Relevance: GS-2: Issues relating to the development and management of Social Sector/Services relating to Education and Human Resources.

Key Phrases: Universal basic income, Economic Survey 2016-17, Identifying Beneficiaries, Insurance against shocks, Administrative efficiency, Poverty and vulnerability reduction, Financial Inclusion, Fiscal issues, Country’s Finances, Inequality.


  • Practical challenges in implementation have come in the way of rolling out a universal basic income scheme proposed by experts and mooted in the Economic Survey 2016-17.
  • According to the official, rolling out a universal basic income scheme to narrow income inequality will be an uphill task -- from identifying beneficiaries to getting them on board and monitoring implementation.
  • For rolling out universal basic income, an institutional mechanism has to be in place. Government has to look into many questions before taking a decision on UBI. Like.
    • Which institution can do it?
    • Who are the eligible beneficiaries?
    • How to track and verify the delivery of benefits on a large scale.

  • Universal basic income (UBI) is a government program in which every adult citizen receives a set amount of money regularly. The goals of a basic income system are to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic involvement.

  • The idea of universal basic income, or a single unconditional income that reduces government efforts to ensure last-mile delivery of individual social security schemes, first featured in the Economic Survey 2016-17 prepared by the then Chief Economic Advisor Arvind Subramanian.

  • The suggestion then was that the scheme will provide every citizen unconditional cash transfer in place of the many benefits, like health facilities, fertilizer, fuel, food subsidies etc. The case for a single unconditional income is that it reduces government efforts to make sure individual schemes reach the right targets.

What are the benefits of Universal basic income?

  • This will take the pressure off the poor from struggling to meet the basic needs and would give them dignity.
  • Their choice of work would become a mode of self-development rather than a desperate means of sustenance. It would seem like a utopian dream, but so was abolishment of slavery, or democracy a century ago. Any other method in India is sure to get sunk in the quagmire of corruption.
  • Insurance against shocks: This income floor will provide a safety net against health, income and other shocks.
  • Administrative efficiency: A UBI in place of a plethora of separate government schemes will reduce the administrative burden on the state.
  • Poverty and vulnerability reduction: Poverty and vulnerability will be reduced in one fell swoop.
  • This would be far lesser than the Rs 9 lakh crore spent through more than ten thousand schemes when we compare the humongous bureaucratic cost incurred in deciding who is poor, and designing and maintaining complex systems to disburse the money. The UBI should become a fundamental right of every citizen.
  • Better targeting of poor: As all individuals are targeted, exclusion error (poor being left out) is zero.
  • Improvement in financial inclusion: Payment – transfers will encourage greater usage of bank accounts, leading to higher profits for banking correspondents (BC) and an endogenous improvement in financial inclusion. Credit – increased income will release the constraints on access to credit for those with low income levels.

Global Scenario

  • Elsewhere in the world, there have been several small-scale experiments with implementing a universal basic income, but they have met with limited success.
  • In April 2017, the government of Ontario in Canada announced a pilot project involving 4,000 people that would have cost 150 million Canadian dollars (US$113 million).
  • The project ended abruptly after a year when the local government changed and the new administration described the program as expensive and unsustainable.
  • In Finland, an experiment with universal basic income ended in December after completing its two-year trial run, and there are currently no plans to continue the program. The trial included a US$630 monthly payment to 2,000 unemployed citizens.
  • In the United States, meanwhile, the concept has been floated in Stockton, California, by its young mayor.
  • Other countries either partially supported or conducted partial experiments include; Namibia, South Africa, Macau, South Korea, Iraq, Iran, Belgium, Bulgaria, Czech Republic, France, Germany, Greece, Hungary, Iceland, Ireland, Netherlands, Norway, Poland, Spain, Australia , New Zealand, Brazil and Switzerland etc.

Challenge with Universal basic income:

  • Universal basic income has often come before on the radar of policymakers as a means of support for the bottom of the pyramid but designing the scheme has proven to be a big challenge.
  • The problem in the scheme comes when cut-offs are set and benefits are targeted at certain groups. Fiscal issues also surface when, rather than having a fixed budget for the scheme covering all citizens, cut-offs for various segments have to be worked out. A targeted scheme cannot be called universal and this will also require another round of Socio-Economic and Caste Census (SECC) to get updated data on beneficiaries as the 2012 data is now outdated and does not provide the correct picture.
  • In its original form of being a universal scheme, applicable to all Indian citizens, the scheme is expected to become unsustainably large, stretching the country’s finances to a breaking point. Even going by the decade-old urban poverty line of ₹1,000 per person per month, providing UBI to about 1.3 billion citizens would cost the government ₹15.6 trillion a year.
  • The country simply does not have this magnitude of resources, so state finances would need to improve further before such an idea is considered implementable.

Way Forward:

  • UBI is not necessarily a silver bullet or a cure-all to end inequality. It is a potentially important tool that works best as a complement to broader poverty eradication programmes. It needs serious attention because we owe an obligation to humanity to end the appalling inequalities.

Source: Live-Mint

Mains Question:

Q. What are the benefits of Universal basic income? Discuss the challenges associated with the implementation of Universal basic income in India. Comment. (250 works).