At a time when the Indian government is considering options to provide basic income to citizens, Olli Kangas, director of governmental relations at Kela, Finland’s social insurance institution, said a key benefit of this scheme is that it simplifies access to social security benefits and reduces the bureaucratic process involved in taking unemployment, sickness and other assistance benefits.
The Nordic country is currently collating database of 2,000 unemployed people who are paid tax-free €560 each a month under a two-year universal basic income experiment started in January.
The results of the basic income experiment in Finland, a country providing over 40 types of social security benefits to its citizens, could offer insights for India on how to design such a scheme and who should be provided basic income. Kangas said the goal of Finland’s basic income experiment is “to obtain information on the effects of basic income on the employment of persons participating in the experiment, and to survey other impacts of basic income”.
The Finland government has allocated €20 million for the experiment on 2,000 persons aged 25-63 years, who were chosen through a nationwide random selection roughly representative of the nation. In India, the Economic Survey 2016-17 has flagged the Universal Basic Income (UBI) scheme as “a conceptually appealing idea” that could work as an alternative to the various social welfare programmes that are targeted at reducing poverty.
There were a number of implementation challenges, especially the risk that it would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable, the survey noted. Apart from Finland, India did a similar pilot on basic incomes in two villages of Madhya Pradesh in 2010. Among the developed countries, Switzerland has rejected a proposal in a referendum to provide universal basic income.
Even though the Indian basic income experiment was broader in nature, it was difficult to gauge the effect of such a scheme on employment generation, he said.
“Indian experiment was in that sense better. It was proper basic income experiment so that everybody in the village got money. But the problem (with) that kind of experimentation is that if something happens in the village, municipality, sometimes (a new) employer comes in the village and starts employing people, then we don’t know if the employment increased due to basic income or is it just due to a new employer. And if in a municipality, one employer gets bankrupt and unemployment increases then the experiment is destroyed,” Kangas said.
While a pure universal basic income advocates the government guaranteeing a minimum income level for all citizens, irrespective of their current income level, India will be more amenable to adopt this concept for people below the poverty line. India had 270 million persons below the poverty line as in 2011-12, as per the latest government data. This comprises 216.5 million rural poor, and 52.8 million urban poor. Kangas said the idea of a UBI was more appealing but the “monetary constraints” make it difficult to adopt.