Why in News? Source: IE

The Indian National Congress party recently campaigned for its NYAY scheme if elected in the upcoming 2024 general elections.

About:

• NYAY stands for Nyuntam Aay Yojana (or Minimum Income Scheme), and it involves an annual payout of Rs 72,000 to each qualifying family.
• In 2018, the incumbent government implemented a similar system known as PM-KISAN, which was advertised as the world’s largest direct benefit transfer scheme for farmers and included “an income support of 6,000/- per year.”

Nyay/PM-Kisan vs UBI

• While these ideas are similar to UBI, they are not the same as the implementation of UBI.
  • A UBI is a system in which the government provides a “basic” income to every citizen in the country, from the richest to the lowest, regardless of whether they work or not.
  • However, the government also eliminates all forms of UBI subsidies, from food to fertilizer to medical costs.
• Nyay and PM-KISAN are different from UBI in three aspects.
  • First, they aren’t accompanied by removal of all the existing subsidies.
  • Second, the sum is far less than what anyone would consider the minimal or basic income that everyone requires in order to live a good life.
  • Finally, the schemes’ scope is confined to a subset of Indians; these are targeted programs, not universal ones.

Benefits of Universal Basic Income?

Poverty Alleviation: Reduces poverty and income inequality

Economic stimulus: By giving money directly into the hands of individuals and stimulating consumer spending, we can boost local businesses, create demand, and generate employment opportunities.

A Health Stimulus: by reducing stress, anxiety, and depression associated with poverty and financial insecurity and improves physical and mental health.

Challenges and Problems with UBI

While Universal Basic Income (UBI) holds promise as a revolutionary social policy, it faces several potential challenges and criticisms too.

A. Cost and Fiscal Sustainability:

• Affordability: In wealthy countries such as Switzerland (which has declined to implement UBI), the UBI sum is substantial despite the fact that the population is small.
  • Even if the UBI amount is lower in poor nations, the population is too high. In any case, affordability is a major impediment.
• Economic impact: Another issue is the decrease of present subsidies and the increase in taxes to pay the UBI.

B. Practical challenges:

• Administrative complexity: Implementing a UBI plan requires an efficient infrastructure and administration (bureaucracy) to manage payment registration, verification, and distribution.
• Political feasibility: Announcing the removal of existing subsidies is almost certain to create a political backlash.

C. Uncertainties and unintended consequences

• Behavioral shifts: The influence of UBI on work ethic, entrepreneurship, and social behavior is unknown and may have unintended repercussions.
• Dependence and disincentive to work: There are worries regarding possible UBI dependency as well as diminished motivation to work, particularly among low-skilled employees.

What Other Options Does India Have for Universal Basic Income?

Direct Benefits Transfers (DBT): This program avoids using middlemen or in-kind transfers by sending subsidies or cash straight to the beneficiaries’ bank accounts.DBT seeks to lessen corruption and leaks while enhancing the effectiveness, accountability, and openness of welfare distribution. Example: PM Kisan, Pradhanmantri Jan Dhan Yojana.

Conditional Cash Transfers (CCT): This program gives low-income households cash in exchange for meeting specific obligations, such having their kids vaccinated, attending school, or going to checkups. CCT seeks to encourage behavioral change while also enhancing the poor’s human capital and long-term results.

Employment Guarantee Schemes: The MGNREGA is a successful example of one such scheme in India. Giving rural households a written promise of work for a predetermined number of days each year.

Inclusive Development: Rather than giving individuals a certain amount of money, put attention on giving them greater opportunities and capacities to engage in and contribute to the economy and society. The structural roots of poverty and exclusion, such as discrimination, lack of access to social protection, infrastructure, healthcare, and education, are also addressed by inclusive development.

Quasi-UBRI: QUBRI is a form of universal basic income (UBI), which is characterized as a cash payment that is given to all people, everywhere, and without conditions. In order to address agrarian hardship, the previous Chief Economic Adviser suggested giving a direct monetary transfer of Rs. 18,000 annually to every rural household in India, with the exception of those who are “demonstrably well-off.”

Way Forward:

• The feasibility and effectiveness of UBI depend on careful design, implementation, and ongoing evaluation.
• Addressing the potential challenges and maximizing the benefits requires thorough research, public debate, and pilot programs to gather evidence before widespread implementation.

‘If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.’