If practicalities dictate that India’s tenuous social protection framework be sacrificed at the altar of a basic income, then it can actively undermine the social contract.
Several commentators have remarked that Universal Basic Income functions as a Rorschach test for the welfare state, given that it draws its support from a diverse ideological coalition ranging from the libertarian right to the liberal left that sees it as mediating their own preferred versions of an ideal society.
But a vehement debate simmers below this shallow consensus between those who see a UBI as restraining the worst paternalistic tendencies of a convoluted welfare state, and those who support its role in plugging the gaps of a social protection floor alongside universal services and efforts to reform existing programs.
The empirical incongruence between evaluations demonstrating the value of cash transfers and the significant recent improvement in India’s existing welfare schemes, alongside the relative absence of any evidence on a long-term state-financed universal basic income, further muddles a straightforward resolution to the debate.
The Economic Survey’s chapter on the topic greatly clarifies the terms of the debate by explicitly articulating a rationale for a UBI and the hard choices it demands of policymakers. It has raised both the rigor and the quantity of the discourse—no minor feat.
Beyond improving the conversation on the concept of a UBI, the survey’s chapter presents a commanding argument for using a UBI to bind both citizens and the government in a common project that advances social and economic justice. It rightly dismisses concerns that unconditional income would discourage work and refutes assertions that divorcing income from employment or social contribution would be morally untenable.
Using new evidence, it focuses attention on the disconcerting weaknesses in the administration and expenditure management of India’s social programs, while affirming that programs like the PDS have made forward strides by universalizing coverage and recognizing the challenge posed by limited financial inclusion and Aadhaar authentication failures.
For all its acuity and painstaking effort in defining the contours of the problem, the Economic Survey’s prescription is flawed both in its proposed design and implementation. Far from what is needed to realize its ambitious vision, the survey proposes a cash transfer with a dubious ability to compensate beneficiaries for the transition costs of moving to a new system, and one that would be financed by an indiscriminate culling of existing welfare schemes. Examining the existing literature on targeting approaches, necessitated by the survey’s emphasis on “quasi-universalism,” reveals that their impact on efficiency and cost-effectiveness can vary greatly based on administrative capacity, imperfect information, and unintended costs.
The benefits of finer targeting can often be achieved at lesser cost by expanding coverage of in-kind benefits or providing uniform transfers contingent on a simple set of transparent, verifiable criteria, if not untargeted and uniform transfers. There is also the very real possibility that both national and regional politics may distort the original intent and value of a UBI into a scheme indistinguishable from India’s DBT regime, which suffers from its own implementation deficit, compounded by the unresolved concerns surrounding the Aadhaar framework.
The uncertainty about the design choices (which go beyond targeting to include the duration and frequency of transfers) and the political feasibility of a UBI emphasizes the need for an Indian UBI pilot of sufficient length to test the impact of introducing regular, unconditional, universal cash transfers. A basic income trial implemented by a state administration (or several, such as the variety of municipal tests under way in the Netherlands) to accurately mimic real conditions, with an independent organization running a large-scale experimental evaluation, would generate hard evidence. This is what the empirical and political discourse around an Indian UBI gravely needs before it can graduate from academic conferences and opinion pages into parliamentary debate and legislation.
It is also important to be clear-headed about the virtues of evidence. Instituting a UBI requires public support spanning demographic lines, executive backing, and strong macroeconomic fundamentals. Weaken any leg of this tripod, and the redistributive preferences of any government may shift in favor of traditional welfare support and focusing on economic growth. And even if an experiment were to yield spectacular results, the financing question is key. If practicalities dictate that India’s tenuous social protection framework be sacrificed at the altar of a basic income, then it would turn quickly from manna from heaven to actively undermining the Indian social contract.
None of these objections forms an insurmountable obstacle toward one day implementing a clean, well-designed UBI that simultaneously empowers Indian citizens and strengthens the Indian state. Some of them may even lose their edge if India can fill the evidence gap around such policies and build administrative muscle by recasting its systems of public financial management and tax collection, with accompanying reforms to boost digital payments and financial inclusion.
In 1961, Nehru wrote to India’s chief ministers that “it is generally recognized now, even by our critics in India or abroad, that we plan well and we lay down the most excellent of principles. The difficulty comes in implementation.”1 Unless both the policy’s critics and supporters undertake a concerted effort to better address the above discordances, India’s UBI will meet the same fate.
This is an edited excerpt from the recent report titled “India’s Universal Basic Income: Bedeviled by the Details”, written by Saksham Khosla, Research Analyst at Carnegie India. The full report can be read here.