Is Universal Basic Income Feasible for India? Explore Pros, Cons, and Arguments for UBI Scheme in India

Universal Basic Income (UBI) has been one of the most debated ideas in modern economic policy. The concept is simple: every citizen receives a fixed amount of money regularly, no conditions attached. But for a country as diverse and economically layered as India, this simple idea becomes a complex puzzle. So is Universal Basic Income feasible for India, or is it an idealistic dream? Let’s break it down in a structured way.

 

What is Universal Basic Income: Context

Universal Basic Income (UBI) is a model where every citizen receives a fixed, unconditional cash payment. It’s a periodic and unconditional cash transfers to every citizen be it monthly or yearly. The payment is regardless of their employment status, income level, or any other condition. Not loans. Not subsidies. Not any vouchers. It’s plain cash payment.

UBI Scheme in India

Universal Basic Income (UBI) in Indian context means: Unconditional cash transfers to every citizen (or targeted groups). The cash transfers are regardless of income or employment status of those citizens or groups. In India, this could mean ₹7,000-₹10,000 per person annually, or roughly ₹500-₹800 per month. Some proposals suggest higher amounts, but we’re talking about supplementing income, not replacing employment.

 

Is Universal Basic Income Feasible for India?

In India, the key question is whether UBI is economically feasible given its population size, fiscal constraints, and welfare structure. The key word here is unconditional cash payment. You don’t have to be unemployed to receive it neither have to prove you’re poor. You don’t have to work a specific number of hours.

Let’s look at the need of a UBI scheme in India and why it is even discussed in India. It’s being discussed and proposed because India’s welfare system is fragmented with 400+ schemes for marginalised and economically poor citizens. A lot of schemes are leak-prone, bureaucratic, and slow which are unable to fully support vulnerable groups, like farmers, informal workers, women, and gig workers.

 

Arguments in Favor of UBI in India

1. Structural Economic Transformation

Here’s what gets lost in the feasibility debate: UBI isn’t primarily about charity. It’s about structural transformation.

India has 46% of its workforce in agriculture, generating about 18% of GDP. This is massive hidden unemployment. People would leave farming for more productive sectors but they can’t, because they have no income floor. They’re trapped.

A UBI scheme could:

• Enable skill development: Workers could invest time in training without starving.
• Support structural change: Labor could move from low-productivity agriculture to higher-value sectors.
• Boost entrepreneurship: People could take risks on new businesses
• Enable education: Parents could keep children in school instead of sending them to work

South Korea, Taiwan, and Singapore all moved from agricultural economies to high-value manufacturing and services. UBI could be the income floor that enables this transition in India.

The productivity gains from this transformation could actually exceed the cost of UBI. It means that over time, UBI pays for itself through higher economic growth and tax collection.

 

2. UBI Helps Reduce Poverty Quickly and With Certainty

Poverty in India is often one shock away, an acute or chronic disease, crop failure, monsoon delay, job loss. For poverty in India, Universal Basic Income is feasible solution. UBI can ensure a quick relief without paperwork, removal of middlemen and leakages.

Example: During COVID-19, direct benefit transfers (DBT) like Jan Dhan deposits reached crores of women instantly. This proved that cash transfers at scale are possible and life-saving.

UBI could stabilize migrant labourers, gig workers (Swiggy, Zomato, Uber riders), seasonal workers, and small farmers alike.

 

3. State of Nutrition and Women Improved

Let’s understand it with “The Madhya Pradesh Pilot”, the most credible evidence that actually worked for people.

Between 2011 and 2013, the Self Employed Women’s Association (SEWA) and UNICEF conducted a randomized control trial in rural Madhya Pradesh. Over 6,000 people in 8 villages received monthly cash transfers of ₹750 for 18 months. Control groups in similar villages received nothing.

The results were rigorously measured across 15,000 individuals through multiple survey rounds, tracking nutritional indicators, school attendance, health outcomes, and spending patterns.

What Changed:

• School Attendance Increased: Children in recipient households attended school 20% more frequently. Why? Because families could afford the indirect costs of uniform, books, and transportation.
• Nutrition Improved Dramatically: Consumption of pulses increased by 1,000%. Vegetables by 888%. These aren’t marginal gains. When you’re a parent watching your child go hungry, you’re not thinking about marginal improvements. You’re thinking about whether your child will be malnourished. The pilot changed this calculation.

When the pilot started, 45% of people reported they didn’t have enough funds for food. After 18 months, that number fell to 19%.

• Women’s Agency Transformed: Women who received cash transfers were significantly more likely to take control of household spending decisions. They invested in health. Women get more mobility and better nutrition for the family. Also, they were more likely to leave exploitative situations because, with UBI scheme, they weren’t entirely dependent on their employers.
• The Employment Didn’t Drop: People didn’t stop working. In fact, productivity increased. People invested more in agriculture, in small businesses, in skill development. Why? Because when you’re not in survival mode, you can think strategically. You can invest in a better tool, better seeds, or learning a new skill.

 

4. Farmer Welfare and Increased Agri Productivity

The instance of ”Telangana State’s Rythu Bandhu” tells a farmer success story. In 2018, Telangana decided to provide direct cash support to farmers unconditionally with ₹8,000 per acre annually (₹4,000 per crop season), regardless of farm size or financial status.

Actual Impact: By 2022-23, the scheme had distributed ₹65,192 crore cumulatively across nine seasons-

• Agricultural output increased by 14% in recipient areas
• Agricultural income increased by 11%
• Over 65 lakh farmers benefited, with 73.63% being marginal farmers

Here’s what makes this different from welfare: it’s an investment in productive capacity. Farmers weren’t just consuming; they were producing more. The scheme reached landless laborers, marginal farmers, and big landlords. Some of the benefits went to richer farmers, which raises equity questions. But it is clear that cash transfers, when devised well, can work wonders.

 

5. Unexpectedly, More Working Hours and Well-Being

The Finland national trial displayed unexpected work benefits. Finland was the only country to conduct a nationwide randomized control trial of UBI. In 2017-2018, Finland government gave 2,000 randomly selected people €560 per month ($600) for two years, unconditionally.

Surprisingly, people who received UBI were more likely to be in jobs than the control group. They didn’t choose to work fewer hours when they received Universal Basic Income; they worked about the same. But they reported less stress, less anxiety, and greater well-being.

It directly contradicts the “people won’t work if you give them free money” argument that shapes much of the UBI debate.

 

6. UBI Scheme Reduces Distortions in Labour Markets

People often stay in low-paying jobs just to retain benefits from government schemes. UBI removes this distortion, allowing people to shift to better jobs in new cities and upgrading their skills. This can improve India’s overall workforce productivity.

 

7. Replaces Leak-Prone Subsidies

UBI scheme in India could also help remove the spends of billions on existing subsidies. Such subsidies are given for food, fertilizer, LPG, electricity, employment schemes, etc. All schemes have leakages despite digitization. Before Aadhaar reforms, PDS leakages in some states were as high as 40–50%. UBI eliminates intermediaries and gives control directly to citizens.

 

Arguments Against UBI in India

1. Can India Afford Universal Basic Income – Not Yet

UBI can cause a fiscal tsunami in the country. UBI for all 1.4 billion Indians at even ₹7,500 per person annually would cost approximately ₹10.5 lakh crore per year. That’s roughly 4-5% of India’s GDP. Put that in perspective: India’s entire health budget is ₹82,000 crore. India’s entire education budget is ₹1.25 lakh crore.

The answer to the question, ‘Can India Afford UBI?’  is a technical Yes! But the answer to the question, ‘Is Universal Basic Income Feasible for India?’  is a clear No! Because the trade-off is brutal.

Either we cut existing welfare programs and subsidies which would hurt the most vulnerable. Or we raise taxes significantly which could reduce business investment. Additionally, removing agricultural subsidies would face massive farmer opposition.

Note: The Economic Survey 2016-17 called UBI “a powerful idea whose time has come” but even acknowledged the fiscal challenge.

 

2. Inflation Threat

If we inject ₹10 lakh crore per year into the economy without increasing productive capacity, prices may rise. The Telangana Rythu Bandhu experience offers a warning. Some studies noted that while farmers received cash transfers, the cost of farm inputs (fertilizer, seeds, pesticides) also increased by about 30% and labor costs rose. Even liquor prices went up 20%.

This doesn’t mean UBI causes inflation. It means that in a supply-constrained economy (especially in rural areas), cash transfers can push up prices, eroding some of the purchasing power benefit.

 

3, The “Work Disincentive” Question

The research here is genuinely mixed. Finland showed no work disincentive but India’s pilots showed increased economic activity. But other studies aren’t so optimistic. A UK modeling study found that if full UBI replaced work incentives (meaning people chose not to work), employment could fall by 2-3 percentage points. It could mean 3-4 million fewer workers.

In India’s context, the Worker Population Ratio is already only 46.8% in urban areas. If rural workers know they’ll receive UBI regardless, would they work in farms during harvest season? And India’s food security depends on those workers.

 

4. Last-Mile Delivery Infrastructure

Even with Digital Benefit Transfers (DBT) through Aadhaar, India still struggles with:

• Biometric Authentication Failures: In some states, up to 20% of Aadhaar authentication fails due to fingerprint wear or technical issues. For MGNREGA, these failures directly result in workers not being able to access their wages.
• Banking Infrastructure Gaps: Over 100 million Indians still don’t have access to functional bank accounts. Opening accounts and ensuring they’re actually usable remains a challenge, especially in remote villages.
• Digital Divide: An estimated 200+ million Indians don’t have smartphones or internet access. How do they receive their UBI? Physical cash distribution? That brings back administrative costs and corruption risks.

 

5. Reduced Targeted Support to the Poorest

UBI gives the same amount to rich ones and to landless labourers. If introduced without removing other welfare schemes, it increases costs. If introduced instead of other welfare schemes, the poorest may lose targeted benefits.

India’s top 1% owns about 40% of national wealth. The bottom 50% owns less than 3%. If you implement universal UBI, the same ₹500 goes to: a business owner with net worth of ₹10 crore, a marginal farmer with 0.5 acres land, and a daily wage labourer. From one perspective, this is fair that everyone’s a citizen. From another, it’s economically inefficient.

 

6. Risk of Political Misuse

UBI can become a vote-buying tool and political party can use it as a populist promise without economic backing. Indian elections already see massive freebies, like electricity bill waivers, loan waivers, free smartphones, cash handouts, etc. UBI might amplify such competitive populism.

 

Also read, How to Prepare for CAT GDPI Topics

 

Feasibility of Universal Basic Income in India

This is fundamentally different from India’s current welfare landscape, where you have MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), PM-KISAN (which gives ₹6,000 annually to farmers), Public Distribution System (PDS), and dozens of other schemes. Each scheme has its own eligibility criteria, documentation requirements, and leakage points.

If UBI is set at a level that’s truly survival-only (₹500/month), it probably won’t create major disincentives. But if it’s set at a level where someone could actually live comfortably without working (unlikely in India’s cost structure, but theoretically possible), work incentives could decline.

For India, this raises fundamental questions about fiscal capacity, population size, and administrative costs.

 

 

Is India Ready for Universal Basic Income?

Full-scale, immediate, universal UBI for all citizens? No, not feasible in 2025. The fiscal constraints and inflation risks are real. The political hurdles are real. But targeted, phased, and carefully designed UBI is absolutely feasible.

A quasi-universal program for the vulnerable 25-30% could start immediately, if we have:

• Proven pilots showing it works (Madhya Pradesh, Telangana)
• Digital infrastructure ready (DBT, Aadhaar, Jan Dhan)
• Funding mechanisms available (subsidy rationalization, tax improvements)
• Implementation experience (multiple states running similar schemes)

 

What’s Actually Feasible for India

Given all these constraints, we can choose either of these paths for India:

Path 1: Quasi-Universal UBI for vulnerable groups instead of UBI for 1.4 billion people

Implement it for: The elderly (65+): ~130 million people | The disabled: ~40 million people | Marginalized groups (SC/ST): ~270 million people | Landless agricultural workers: ~100+ million people

This would cost roughly ₹50,000-₹75,000 crore annually, but one-fifth to one-quarter the cost of universal UBI.

 

Path 2: Integration with Existing Schemes

Rather than replacing MGNREGA or PM-KISAN, complement them with additional cash payment on top of the existing amount. Likewise, MGNREGA provides work-for-wages. Supplement this with a small unconditional cash component.

Public Distribution System provides subsidized grain. A modest cash transfer for flexibility can be added on top of it. This approach costs less because you’re building on existing infrastructure, but it’s more targeted than full UBI.