Date : 19/10/2023

Relevance:GS Paper 2- Social Justice - Empowering Vulnerable Communities

Keywords:Nyuntam Aay Yojana, WorkFREE pilot project, SEWA, Cash Transfer

Context-

The COVID-19 pandemic has underscored the limitations of traditional policy tools in safeguarding vulnerable populations in India. It has highlighted the urgent need for innovative approaches to address poverty and inequality. One such proposal gaining traction is the concept of Universal Basic Income (UBI), a regular cash payment disbursed to every member of a political community without means-testing, work requirements, or conditionalities. In a diverse country like India, where the needs of different population segments vary significantly, UBI presents a potential solution to create a more inclusive welfare system.

Why do we need UBI?

• Diverse Governance Challenges: India's diversity has long presented unique governance challenges. The vast array of demographics, from tribal communities in Assam to urban graduates in Delhi, landless laborers in Maharashtra, and homemakers in peri-urban Tamil Nadu, demands tailored policies that can be difficult to establish uniformly. Conventional policies often fail to acknowledge these diverse needs and can be inefficient in their delivery. For instance, providing free bus services may be irrelevant to those without access to public transport.
• Narrowly targeted policies: Government Policies can overlook the priorities and challenges specific groups face. For example, distributing sewing machines to empower women may miss the crucial step of assessing whether tailoring aligns with their aspirations or if employment is their most pressing concern at the time. Such policies can result in ineffective governance and create misguided populist incentives.
• The Role of Cash: Cash, as a universal medium of exchange, holds the potential to provide individuals with an economic safety net, allowing them to address their needs as they see fit. This approach doesn't diminish the importance of quality government services but complements them. It ensures that those at risk of falling through the cracks are protected and provides people with the means to access better services.
• Reduce Burden of Paperwork: The universality and unconditionality of a basic income scheme eliminate the need for extensive eligibility assessments, freeing both beneficiaries and the government from the burden of paperwork. In a country with limited documentation and awareness, such a scheme promises more robust coverage.
• Security During Crises: Universal Basic Income offers crucial security, helping people weather crises such as health shocks, unemployment, natural disasters, and unforeseen circumstances. These events can push already vulnerable individuals into extreme poverty, exploitation, and cycles of debt. Evidence from cash transfer and basic income programs worldwide reveals that people use these resources to invest in better housing, healthcare, education, and savings, reducing their dependence on credit. They also gain access to additional training, education, entrepreneurial opportunities, asset-building, and improved employment.

Five Accepted Principles of UBI

• Unconditional Support: Recipients receive cash support without any work requirements or means-testing.
• Periodic Payments: Regular cash transfers replace lump sum payments.
• Direct Cash Transfer: Cash is directly given to beneficiaries instead of coupons or equivalents.
• Individual Beneficiaries: UBI is granted to individuals rather than households.
• Freedom to Spend: Recipients have the freedom to spend the cash based on their specific needs.

Transforming Lives Through UBI

The WorkFREE pilot, which supports 1,250 residents across five Hyderabad slums, is demonstrating how UBI can bring positive change:

• Economic Expansion: Many beneficiaries have utilized the cash support to expand their economic activities or cover emergency expenses. For example, some used the support to enhance the food business by purchasing a refrigerator, while some families invested in new businesses under projects. .
• Meeting Basic Needs: A mid-term survey conducted in July 2023 found that a majority of beneficiary households used the UBI to buy food, fuel, clothing, and utility bills, which form a significant portion of their monthly expenses. Others directed the funds toward education fees, savings, debt repayment, and investment in assets.
• Enhancing Health Access: Approximately 43% of households used UBI funds for medical expenses, including medicines, diagnostic tests, and doctor visits.

Work and Substance Misuse Concerns Addressed

Reduced Incentives to Work

• The concern is that if individuals receive unconditional cash transfers, they may no longer have the motivation to seek employment. However, evidence from basic income pilot programs around the world suggests otherwise.
• For instance, in the SEWA and WorkFREE pilot programs, many women were empowered to negotiate their way out of exploitative daily wage work and instead invest in small businesses. This demonstrates that basic income can, in fact, enhance individuals' agency and encourage them to pursue alternative economic activities that better align with their goals and aspirations.

Misuse of Alcohol and Drugs

• Another criticism often raised is that providing cash directly to the poor may lead to increased misuse of funds for alcohol and drugs. This concern assumes that the economically disadvantaged are more likely to engage in substance abuse when given access to additional resources.
• However, data from UBI pilots worldwide contradicts these concerns. Recipients remain motivated to work, and substance abuse tends to decrease among cash transfer recipients. Poverty is more likely a cause, rather than an inhibitor, of substance abuse among the economically disadvantaged.

India's Ongoing UBI Initiatives

India has been exploring UBI for over a decade, with positive evaluations demonstrating its efficacy. For instance, the Self-Employed Women's Association (SEWA) pilot, conducted in Delhi and Madhya Pradesh in 2011, provided compelling results.

National and State-level UBI Proposals

In recent years, political leaders and state governments have taken steps toward UBI implementation. The Congress proposed the Nyuntam Aay Yojana, promising guaranteed monthly income to poor families, and Odisha implemented the Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme to support farmers and agricultural laborers.

Challenges and Customization

While UBI has gained traction, states may need to customize UBI models to suit their unique needs and microeconomic factors. Collaborations with various stakeholders can help build a robust UBI ecosystem, ensuring the program's success.

Conclusion

The UBI approach has the potential to empower marginalized communities by providing financial stability, meeting basic needs, and promoting entrepreneurship. As UBI initiatives continue to evolve, India stands at the forefront of addressing poverty and inequality, shaping a more secure future for its citizens.
In a rapidly changing world characterized by automation, unemployment, climate crises, pandemics, declining female labor force participation, and growing inequality, UBI, coupled with improved government services, offers a promising approach to empowering the poorest and most vulnerable sections of society. It provides control, benefits, and freedom to those who need it most, addressing the root causes of poverty and inequality.

Source - Down To Earth