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Monday, June 01, 2020

Why everybody loves Universal Basic Income

The Budget has promised an assured income to farmers, Rahul Gandhi a minimum income guarantee, and Sikkim a universal basic income by 2022. Back in 2016-2017, the Economic Survey said UBI was an idea whose time was ripe for discussion. As that talk picks up in the run-up to the Lok Sabha elections, The Indian Express parses the debate, starting from India’s only two pilot projects

Written by Ankita Dwivedi Johri | Updated: February 3, 2019 12:41:11 pm
Why everybody loves UBI Ramkanya (left), family in Mali Badodia village. Many villagers bought goats with what they saved from the money received. These have multiplied. (Express: Gopal Verma)

FINANCE Minister Piyush Goyal on Friday unveiled the Pradhan Mantri Kisan Samman Nidhi promising “assured supplemental income” to disadvantaged farmers. On January 28, Rahul Gandhi said a Congress government would provide “minimum income guarantee” to the poor. Sikkim’s SDF government has assured universal basic income to its 6.10 lakh people by 2022. In more constrained terms, the Telangana government’s Rythu Bandhu scheme and Odisha’s KALIA also assure a fixed amount to farmers. Months to go for what would be a bitterly fought general election, basic income, which once seemed likely to remain a matter of debate — and stay in the pages of an Economic Survey — now appears a real possibility.

Eight winters ago, the first ever pilot in India to test the feasibility of a basic income programme was carried out in a West Delhi slum — prompted by complaints over a “clogged” PDS scheme. The participants had Rs 1,000 transferred to their accounts per month for 2011, to spend anyhow they liked. Soon, nine villages in Madhya Pradesh were picked for the Madhya Pradesh Unconditional Cash Transfers Project, the 18-month trial the only large-scale basic income programme conducted in India.

In the first, recipients were given money in exchange for PDS. In the second, 6,000 people (all members of a household) got money over and above the schemes. The results, in both cases, the organisers say, were “positive”.

Sitting outside her two-room shanty in West Delhi’s Raghubir Nagar slum, Leelaben says when she was first told she would be given Rs 1,000 per month in exchange for her ration, she was apprehensive. “But the quality of the grains at the PDS shops was so poor, I decided to go ahead,” says the 67-year-old.

READ: ‘We thought this project would last forever’, says MP villager on pilot project by SEWA

Leela, a widow, was one of the 100 women in the area who voluntarily opted for the ‘Delhi Cash Transfer’ pilot study, organised by the NGO Self Employed Women’s Association (SEWA). “I earn about Rs 2,500 per month. Apart from the wheat from PDS shops, with the extra Rs 1,000, I could buy sugar, oil, spices. I didn’t have to stand in queues outside PDS shops or government hospitals,” says the mother of 10, all of whom are married.

Rahul Gandhi with Chhattisgarh CM Bhupesh Baghel at the event. (Express photo)

Also, says Leela, who now stays with one of her sons, “for the first time, I could save some money”. “I got my grandchildren enrolled in tuition classes,” she beams.

SEWA Bharat Chairperson Renana Jhabvala says they approached then deputy chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia, sometime in 2009. “We told him about a basic income pilot in exchange for PDS. He liked the idea and said why don’t we start from Delhi.”

One of the charges against the universal basic income (UBI) idea is that people would waste the money. Jhabvala says their findings were opposite — “Most households spent the money well.” The pilot study also found that “cash transfers did not adversely affect food security”, and the basic income allowed households to “spend more on healthcare”.

The Economic Survey 2016-17 that first stirred a serious UBI debate in India cited the MP study, which was also run by SEWA, with funding from UNICEF, and in coordination with the state government. “One of the major findings of the study is a shift from wage labour to own cultivation… the study also shows that if the right amount is given as a basic income, the positive effect is disproportionately higher than what the monetary value is. In other words, the emancipatory value of basic income is several times greater than its monetary value,” the Survey said.

The 40-page chapter in the Survey that dealt with the issue was titled ‘Universal Basic Income: A Conversation With and Within the Mahatma’ — the discussion centring around whether Mahatma Gandhi would have endorsed UBI. It called it “a powerful idea whose time even if not ripe for implementation is ripe for serious discussion… It could be to the twenty first century what civil and political rights were to the twentieth.”

What works

Over the years, in the face of poor allocation, leakages and corruption in government schemes, the idea of a UBI has found resonance with political parties and economists. The failure to tackle poverty and unemployment has added more force to the pro-UBI argument.

Theoretically, the idea is simple: an unconditional, regular, periodic cash payment to all citizens, without any requirement of work, with ‘universality’ and ‘unconditionality’, as outlined in the Economic Survey 2016-17 as well. But it is these factors itself that complicate the UBI discussion.

PM Narendra Modi, Narendra Modi, AIIMS, IIMC, Ladakh University, All India Institute of Medical Sciences, Ladakh Varsity FINANCE Minister Piyush Goyal on Friday unveiled the Pradhan Mantri Kisan Samman Nidhi promising “assured supplemental income” to disadvantaged farmers.

“A number of implementation challenges lie ahead, especially the risk that UBI would become an add-on to, rather than a replacement of, anti-poverty and social programs, which would make it fiscally unaffordable,” the Survey had pointed out.

Despite the “encouragement” to the pilot studies in both Delhi and MP, Jhabvala points out, the government response was lukewarm. Arvind Subramanian, the former chief economic advisor, believes that while all parties “clearly like” UBI, their reluctance comes probably from “fiscal costs and challenges”.

Gopal Krishna Agarwal, the BJP national spokesperson on economic affairs, says the Pradhan Mantri Kisan Samman Nidhi bears this in mind, distinguishing it from the Congress promise. “The BJP has always looked at schemes that are targeted at weaker sections. What Rahul Gandhi is proposing would involve withdrawing several subsidies, and that is not conducive. In the future too, we will not look at universal schemes, but those which help uplift the poor. The rest are already benefiting from the growing economy,” he says.

Praveen Chakravarty, chairman of the data analytics department of the Congress, counters that the party has a plan in place to implement Rahul’s promise. “UBI as an idea is not new. The Right likes it for its efficiency and the Left for its egalitarianism. What Rahul Gandhi proposed is not UBI, but its adaptation. We will have a structured way of determining who falls within the minimum income threshold, and what that income will be,” says Chakravarty, adding that the exact details will be in the Congress manifesto.


Good in theory, but will it work on the ground?

At one level, the idea of UBI is simple: an unconditional, regular, periodic cash payment to all citizens, without any requirement of work, with ‘universality’ and ‘unconditionality’. But it is these factors itself that complicate the UBI discussion, ranging from how much to give and to who all, to who will pay for it and what to take away.

But several experts argue that UBI is in fact an affordable option for India, if accompanied with smart “budgetary and taxation choices”. “Certainly a country that grows 7 per cent a year could afford 3-4 per cent increase in government spending,” says Abhijit Banerjee, the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology. “UBI is universal. We don’t decide (who gets the money), other than maybe based on age or gender. Also, the amount cannot be trivial. But whether it is Rs 1,500 or 2,000 (per month) will have to be based on budget priorities and how much revenue we can generate,” says Banerjee, who is also the director of the Abdul Latif Jameel Poverty Action Lab, that is part of a 12-year study to examine the effects of UBI in Kenya.

The programme aims to evaluate both the short- and long-term effects of UBI on recipients’ economic status, time use, risk-taking, gender relations, and broader outlook on life. The results are expected later this year.

Most economists propose scrapping welfare schemes that have run their course. “UBI is fiscally affordable. There are literally thousands of so-called welfare schemes across India, most of which are a complete waste of money and foster corruption,” says Dr Guy Standing, professorial research associate, School of Oriental & African Studies, and co-president of the Basic Income Earth Network (BIEN), who was associated with the MP study.

Standing recommends that parties contemplating a basic income should take note of the lessons from MP. “Contrary to what many presume, a universal scheme would be much more efficient and cost much less than a scheme targeted at only half the population,” he says, adding that targeting of a certain section only leads to more corruption.

More recently, Subramanian, who as then CEA proposed UBI in the Economic Survey 2016-2017, suggested a Quasi-universal basic rural income (QUBRI) scheme to tackle agrarian distress. In a paper titled ‘Quasi-Universal Basic Rural Income: The Way Forward’, Subramanian and his co-authors suggested transfer of about Rs 18,000 annually (Rs 1,500 per month) per household to cover 75 per cent of the rural population, at a total fiscal cost of about 1.3 per cent of GDP or about Rs 2.64 lakh crore, except the “demonstrably well off”.

QUBRI, the paper said, would bank on the 2011 Socio-Economic Caste Census (SECC) to identify the rural poor.

On how they arrived at the Rs 1,500 per month figure, Subramanian says, “There is no magic number that will appeal to all. Plus, there are trade-offs because of budget constraints. We looked at various combinations of coverage, benefit per household, and fiscal costs. It seemed that a 75 per cent coverage of rural households with a transfer amounting to about 1/3rd of the current consumption of the poorest could be affordable. To qualify as ‘basic’ it must be a reasonable enough amount, and the 1/3rd number (higher for the poorest households) was reasonable.”

Arguing that QUBRI would be better than Rythu Bandhu and KALIA, he notes that it also includes non-farm rural households. “Rythu Bandhu and KALIA, while laudable, require onerous identification requirements, land titling, proof of tenancy etc. Our proposal aims to simplify it, to identify only the relatively small portion who will not be eligible.”

But, while a large part of the debate is centered around ‘who gets the money’ and ‘how much’, it has also been about who bears its fiscal burden. Subramanian’s QUBRI paper proposes that the amount be shared between the Centre and states.

For QUBRI, Subramanian suggests cutting down farm subsidies and pruning Centrally sponsored schemes. “QUBRI should not be financed from RBI resources, not least because they are one-time and cannot finance a permanent QUBRI entitlement, and by the states or Centre breaching their existing fiscal commitments,” the QUBRI paper says.

Subramanian adds that as per their proposal, MNREGS and PDS would stay, as would old age pensions and maternity benefits. “We have identified other schemes that might be removed, such as interest rate subsidies, price deficiency, and fertiliser subsidies.”

Milan Vaishnav, Director and Senior Fellow, South Asia Program, Carnegie Endowment for International Peace, says that instead of scrapping schemes, states could be given “greater untied funds from the Centre”. “Scrapping a flagship social scheme like MNREGS is a blunt instrument, when not all states will face the same requirements,” he says.

But Vaishnav also points out that a “truly universal UBI” would mean “an income top-off to all households, which would do nothing to reduce inequality”. “If, on the other hand, India pursues a quasi-UBI (which only targets poor households), this would have a salutary impact on inequality.”

Economist Banerjee, however, says that “in the medium run, the idea would be to scrap PDS and MNREGS, but not before UBI is up and running. For that reason and others, the amount paid should probably go up over time.”

Both Banerjee and Vaishnav also dismiss the argument that a guaranteed income will impact labour participation. “Our research suggests that making poor people richer does not make them lazier, if anything the opposite,” says Banerjee. “And, if they refuse to clean the sewers manually because they are not so desperate, great. The government needs to be forced to upgrade these services.”

The concerns

Over the years, various basic income pilots have been conducted across the US, Europe, Asia and Africa. In 2017, battling high unemployment, Finland handed out €560 (Rs 48,835) per month to 2,000 jobless people as a trial, without requiring them to work or seek employment. Last month, the government stopped it, against opposition, saying it wanted to explore alternative welfare measures, and without revealing the trial’s results.

Brazil has an ‘anti-poverty’ programme called ‘Bolsa Familia’, involving a cash grant to families below a certain income level, provided they meet conditions such as overseeing their children’s school attendance.

“Basic income programmes have been piloted in Canada, Finland, southern Africa, Kenya. Alaska has a great scheme in which royalties from oil are deposited in an investment fund, and every citizen receives an annual dividend. As far as I am aware, all these have been successful,” says Standing.

However, Jayati Ghosh, professor of economics at the Centre for Economic Studies and Planning, School of Social Sciences, at Jawaharlal Nehru University, cites the example of Iran, where the government is struggling with its ‘targeted subsidy plan’ because of inflation. Arguing against UBI, she says, “Nobody has clarity on who will get what amount, and what happens when prices go up. Any form of UBI will only be useful when it comes on top of guaranteed Universal Basic Services (UBS), which includes health, education. In India, we are looking at UBI as a substitute to UBS. It is problematic and obscene.”

Ghosh also questions Subramanian’s plan of using the SECC to choose beneficiaries. “The SECC says nothing about a person’s income. Also, no one has given any information on the schemes that will be scrapped for UBI.”

Following the release of the Economic Survey 2016-17, former Planning Commission member Bhalchandra Mungekar wondered whether “dismantling the existing schemes would compensate for their present benefits, once these are converted into direct cash transfers”. “The MDM offers hot, cooked meals to more than 150 million school children… The MNREGS gives 60 to 70 days employment annually to about 200 million unskilled persons… The dismantling of the PDS will adversely affect the bottom 50 to 60 per cent of poor consumers,” he wrote in The Indian Express.

SEWA’s Jhabvala also stresses that UBI should not depend on ‘poverty-testing’ for its implementation. “The core idea of UBI is universality. If we get into who is poor and who is not, the the idea will crumble,” she says.

There are also concerns that the very nature of Indian politics could muddy the UBI waters. Experts argue that ahead of polls, parties might want to increase the basic income amount or re-introduce certain subsidies. “On the one side I think it would be great if the political competition focuses on giving away money rather than towards reservations and creating jobs in the Railways. On the other hand I worry that opening an efficient pipeline would encourage irresponsible promises, which will now be more credible, which will then cause problems for those who manage to over-promise and win,” says Banerjee.

Standing suggests the government should begin on a small scale. “I would start with low-income rural communities, perhaps all tribal communities, and gradually roll it out further.”

The UBI chapter in Economic Survey 2016-17 concluded by saying the scheme would have Gandhi’s approval. “The Mahatma as astute political observer would have anxieties about UBI as being just another add-on government programme. But on balance he may have given the go-ahead to UBI.”

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