Jan Dhan 2.0: Consider a universal basic income

livemint.com:

Jan Dhan accounts, a truly staggering count of basic banking relationships created by the government in less than a decade under its Pradhan Mantri Jan Dhan Yojana. As finance minister Nirmala Sitharaman said this week, over 55.5% of these bank accounts are held by women. The scheme, she added, stood out as a “pivotal initiative" for financial inclusion.

With digital identities proven by Aadhaar as its base, it has served as a channel for the direct transfer of cash benefits to various beneficiaries. By making formal credit accessible, it has also helped many of our most needy escape the clutches of moneylenders. Crucially, the scheme’s coverage of India’s poor allows the Centre to provide instant relief from distress in case the need arises.

In 2020, for example, Jan Dhan’s reach proved useful after covid struck. An all-India lockdown sent large numbers of city migrants walking long distances to reach the security of food and shelter at their birthplaces. Pandemic panic may have been worse without the monthly aid of ₹500 for three months announced for each of the 200 million odd Jan Dhan accounts held by women back then.

As a mechanism, however, its most heroic role may be yet to come. For it enables us to envision a social safety net in the form of a universal basic income (UBI). As a policy concept, a UBI is redistribution at its most literal; it puts everyone on the state’s payroll.

The proposal is simple: Apart from fulfilling its usual duties of governance and paying for the security, healthcare and education of people, the state should deploy public funds to grant every adult a certain sum of money for personal use every month. The usual objection to this ‘money for nothing’ is the moral hazard it could pose. If