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Last Updated : Feb 04, 2019 09:35 PM IST | Source:

Podcast | Digging Deeper: All you need to know about universal basic income

The Congress, after winning a few recent key elections in Madhya Pradesh, Rajasthan and Chhattisgarh on the back of promised farm loan waivers, has proposed the implementation of the minimum guarantee scheme, theoretically known as the Universal Basic Income (UBI) scheme.

Moneycontrol Contributor @moneycontrolcom


Moneycontrol Contributors

Poet Kaifi Azmi once wrote,

“Aisa laga gareebi ki rekha se hoon buland,

poocha kisi ne haal kuchh aisi adaa ke saath.”

(I rose above the poverty line for a moment…when someone asked just how I was doing)

He could have been speaking for all of India's poor who, as usual, in an election year are at the forefront of political debates.

The annual Oxfam report has brought home the scale of inequality that exists in the country with statistics that have established what we have suspected all along – that there is massive disparity in the distribution of wealth in the country, and that the chasm between the haves and the havenots is only widening.

Just to refresh your memory a bit, the annual study by Oxfam has stated that the wealth of billionaires in India rose by a whopping Rs 2,200 crores a day in 2018. And the top one percent of India’s wealthiest got richer by 39 percent compared to 3 percent growth in the incomes of the bottom 50 percent.

While political parties spar over who can finally eradicate this divide in the all important election year, the fact staring them and us in the face is that the wealth of the top nine billionaires in India is equivalent to the wealth of the bottom 50 percent of the population and 60 percent or the majority of the population own merely 4.8 percent of the national wealth.

The Opposition, especially the Congress, once infamous for the “gareebi hatao” slogan that almost attracted as much derision as the by-now-discredited catchphrase “India Shining,” has accused the government of being anti-poor. The Congress, after winning a few recent key elections in Madhya Pradesh, Rajasthan and Chhattisgarh on the back of promised farm loan waivers, has proposed the implementation of the minimum guarantee scheme, theoretically known as the Universal Basic Income (UBI) scheme.

And this idea of a Universal Basic Income is what we dig deep into on this edition of Digging Deeper with Moneycontrol with me Rakesh Sharma.

Is Universal Basic Income a timely intervention?

Let us try and understand at the onset why this idea is suddenly creating so many ripples.

To begin with, the timing of the idea seems astute as it comes against the backdrop of rising discontent over banking scams that have brought home to us the porous system that facilitates the siphoning of public money. There is the obvious agrarian distress, and as per the recent explosive Business Standard report, rising unemployment figures that the National Sample Survey Office’s Periodic Labour Force Survey has marked at a 45-year-high of 6.1 percent in 2017-18. (The NITI Aayog has refuted these claims.)

According to News18, two independent members of the National Statistical Commission had resigned this week after the government allegedly failed to publish the report that was prepared last month. The report is still not public. This is the first survey on employment by a government agency after demonetization of Rs 500 and Rs 1,000 currency notes in November 2016. As reports by multiple news sources said, the Periodic Labour Force Survey is the first annual household survey of the National Sample Survey Office and data was collected between July 2017 and June 2018.

News18 said, “Documents reviewed by Business Standard showed that unemployment rate was at its highest since the 1972-73 period, from when the employment data is comparable. In comparison, the unemployment rate stood at 2.2% in 2011-12, during the United Progressive Alliance’s second term, according to the survey. The report showed that the unemployment rate among the youth was at a higher level compared to previous years and “much higher compared to that in the overall population”.”

According to the report, more among the educated were jobless in 2017-18 than they were in 2004-05. For educated women in rural areas, unemployment was at 17.3 percent in 2017-18 compared to 9.7 percent-15.2 percent during 2004-05 to 2011-12. For educated men in rural areas, the unemployment rate rose to 10.5 percent in 2017-18 compared to 3.5 percent to 4.4 percent during 2004-05 to 2011-12.

Add to this, the points made by the Oxfam report according to which India's top 10 percent population holds 77.4 percent of the total national wealth. A deeper study of the data in the report shows the top one percent have cornered 51.53 percent of the national wealth, while the remaining 99 percent make do with only about 48 percent.

Oxfam India CEO Amitabh Behar after the release of the report said, “The survey reveals how governments are exacerbating inequality by underfunding public services, such as healthcare and education, on the one hand, while under-taxing corporations and the wealthy, and failing to clamp down on tax dodging on the other.”

And the shock and outrage over the latest report notwithstanding, Oxfam has always presented us with uncomfortable home truths.

In January 2018, Oxfam had reported that 73 percent of the wealth generated in the year before had gone to the richest one percent, while 67 crore Indians who comprise the poorest half of the population saw one percent increase in their wealth. Their past reports have indicated, give or take a few marginal differences, that over the next 20 years, 500 of the world’s richest people will hand over $2.4 trillion to their heirs – a sum larger than the GDP of India, a country of 1.3 billion people. We learnt that hard work is no guarantee for wealth generation and that in countries like India and the Philippines, at least one in every two workers in the garment sector is paid below the minimum wage. And that it would take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment company earns in a year. It would take around 17.5 days for the best paid executive at a top Indian garment company to earn what a minimum wage worker in rural India will earn in their lifetime (presuming 50 years at work).

In  2018, Oxfam had also proposed a simple way to bridge this gap marginally. And stated that if we assume that in the next 20 years, at least Rs 10,544 billion will be passed on to the inheritors and on that if 30% inheritance tax is imposed, the Government can earn at least Rs 3176 billion. Rs 3176 billion is sufficient to finance six crucial services: Medical & Public Health, Family Welfare, Water & Sanitation, Housing, Urban Development and Labour & Labour Welfare in all States.

The poor that went missing from our idea of India

Economic inequality is never a sudden phenomenon and India has always been a country of extreme disparities, a feature seen prominently in the poetry of progressive, socialist Urdu poets like Kaifi and Sahir Ludhianvi in the fifties, in film songs, and even in cinematic narratives in almost every decade. The mazdoor, the kisaan, the taxi driver, the daily wage workers, the coal miners featured in the biggest blockbusters of the 50s, 60s and 70s. And even Manoj Kumar, the tireless nationalist exhausted with hope, and cognisant of the distance between aspiration and reality, made a film like Roti Kapda Aur Makaan in the seventies with a song damning the ever present 'mehengai' or the rising cost of living that made it impossible for the poor to live, eat and exist with dignity.

Today of course, the country's poor feature rarely if ever in a cinema that largely caters to the idea of India as an omnificent global power, regardless of the alarming unemployment numbers, agrarian unrest, and the struggles faced by small businesses. In such a scenario, the idea of Universal Basic Income sounds like a compelling panacea. But is it a good idea?

Nidhi Chugh wrote in CNBC recently that it might not be. For developed countries, says she, the scheme is simply to fix the hurdles that are blocking the economy to achieve optimal growth. But when it comes to implementing UBI in a developing country like India, it's a different ballgame altogether, she says.

From CNBC: “The UBI — the unconditional cash transfer system — requires the economy to be financially strong to fund the programme, making it the key reason for developed countries to have an upper hand in implementing the scheme. The UBI is one of the most debated topics, not only in India but across the globe. Some developed countries, including the Scandinavian countries, are running pilots and may eventually make it a social welfare norm.”

Jayati Ghosh, an Economics Professor at Jawaharlal Nehru University describes three key problems in implementing UBI in developing countries. According to Ghosh, developing countries have to strengthen their fiscal policies and make them more people-friendly so that when the scheme is implemented, people are able to bear the fruits. She also says that because of the vast population and the existing social and class divide, it will be difficult for the government to cater to the needs of the people efficiently.

The CNBC piece also cites The Economic Survey, an annual report on the state of India’s economy, which shows that there are only 7 taxpayers for every 100 voters in the country. So obviously, there is the question of insufficient funds that will make the implementation of UBI tough. UBI will also have to do away with the existing social welfare schemes.

Is this then a utopian but ultimately false promise?

Dissent, a left-leaning intellectual magazine published by the University of Pennsylvania Press on behalf of the Foundation for the Study of Independent Social Ideas, brings in a global perspective to the debate and discusses how Universal Basic Income, an idea long dismissed as utopian, is now gaining traction on both the right and the left. But it says that UBI’s supporters on the left should proceed with caution.

“Could UBI be a part of a twenty-first-century vision for the labor movement?” asks Alyssa Battistoni, a PhD candidate in political science at Yale University and an editor at Jacobin magazine. Well, the jury is out on that one. But as the piece points out, the idea has seen renewed interest since the 2008 financial crash: as millions of people lost their jobs and wondered whether they’d find new ones.

Here it is important to interject that generations of conservative leaders in the US have cited novelist Ayn Rand's “objectivist” ideas to undermine the idea of the rich paying for the well-being of the poor while conveniently ignoring the atheistic, anti-establishment strains in her work.  But with growing disillusion with crony capitalism and the rise in democratic ranks of young leaders like Alexandria Ocasio-Cortez, the idea of higher taxes for the rich to fund social welfare is being increasingly mainstreamed.

Moreover, Democratic Sen. Ed Markey of Massachusetts has been working with Cortez on a “Green New Deal” legislation that will be unveiled soon, and which according to CNN, will address issues such as job creation, emission reductions, greening infrastructure and a variety of principles that would come with a “robust” climate-change package. The idea is to make capitalist practices more responsible.

And the normalisation of UBI as a political idea, as Dissent magazine points out, is becoming more widespread. UBI was recently endorsed by ‘Movement for Black Lives’ while Canada’s Leap Manifesto calls for consideration of UBI on the grounds of environmental sustainability. The piece also mentions Jeremy Corbyn as an important voice in the debate and he said last September that the Labour Party would investigate the prospects for basic income in the UK, and experiments are on the agenda in Scotland, backed by the left-wing Scottish National Party.

We quote, “Growing public discussion has been accompanied by a small but significant number of experimental programs, mostly in Europe. The United States is also home to the closest thing to a basic income program existing in the world today: the Alaska Permanent Fund. Since 1982, the fund has paid every Alaskan resident anywhere from a few hundred to $2,000 annually out of its oil revenues. But the most prominent supporters of UBI in the United States today are technocapitalists like Peter Thiel and Marc Andreessen, and with the exception of Alaska, basic income experiments are being implemented not by the state but the private sector. Most notably, the seed accelerator Y Combinator is starting a basic income pilot program in Oakland, proposing to pay a hundred families between $1,000 and $2,000 each month, “no strings attached.”

Two colliding worldviews

UBI evokes two conflicting responses in those who speak against and for it. As Dissent says, one view functions as a kind of noblesse oblige—a handout to the unfortunates and another view-point version aspires to egalitarian universalism and challenges the legitimacy of privately accumulated wealth.

The important thing to ascertain at this point is whether Universal Basic Income can become more than a political ploy for the Right and the Left to fight over in India and if it can go on to become a tool of social equity.

There is something to be said about the potential of the idea and as Dissent says, capitalism’s inability to provide a means of making a decent living for the over 7 billion people currently alive is one of its most glaring defects—and one of the most significant opportunities for the left to offer an alternative. A universal basic income, though not the only answer, might point us in the right direction.

The piece also cites Andy Stern, the former head of the SEIU, whose 2016 book, Raising the Floor, explains why basic income is the way to “invent a better future.”

There is also Dutch journalist and basic income advocate Rutger Bregman for whom basic income represents the way to true human fulfillment—the post-work utopia that we need and that we can, in fact, achieve especially at a time when productivity gains have reaped profits for owners of capital and made life harder for those who are working harder than ever to cling to their jobs.

Parsed in the context of these views, it seems easy to deduce that in a country like India, a universal basic income could reduce crime, child mortality, malnutrition, and teen pregnancy, and increase gender equality, educational outcomes, and economic growth.

But the piece also cautions that for UBI to be a genuine step toward a post-work society, it has to be genuinely universal and unconditional, provide enough income to actually live on, and supplement rather than replace the welfare state.

We quote, “In recent years UBI pilot programs have rolled out in Namibia, Kenya, and Uganda, mostly funded by NGOs; more generally, cash transfer programs, which aim to diminish poverty by giving poor people money—though often with specific criteria or restrictions—are the latest fad in development.”

The use of the word "Fads" trivialises the help the world's poor need to rise above their disadvantages but it also sums up how easy it to think of UBI as a passing political fancy rather than a real, practical solution to poverty.

As the punchline of the piece says, “Utopia is possible. If we want it, though, we’ll need to make it a part of the demands and visions of the left movements we build over the next few years. Because we can’t just invent the future—we’re going to have to fight for it.”

The Indian perspective

The Wire recently asked the question that we have been exploring in this podcast: Can Universal Basic Income Help Create an Equitable Society?

Or could a variant of UBI, a negative income tax, likely be a better fit for India?

In response, writer Nikhil George, a Research Assistant at the department of Economics at Monk Prayogshala, a not-for-profit academic research organisation based in Mumbai, cites the example of Scandinavian countries to prove that an equitable society is not only theoretically plausible but also practically feasible. But he also adds that the Nordic model cannot be implemented in India, owing to population levels and per-capita income.

UBI, he points out is not a new fangled idea in the Indian context. The country has experimented with numerous poverty alleviation schemes over the decades and the government of India had even proposed the introduction of UBI in the Indian Economic Survey (2015-16).

UBI in simple terms, as George explains, is a form of social security where all citizens receive an unconditional sum of money. It was originally considered for one of two reasons, says the piece, as we are moving towards a more technologically competent world, a large portion of the workforce in various sectors, such as agriculture, may become redundant. As a result, UBI would be granted in order to compensate for the losses to make ends meet. Whereas in a developing world, UBI was proposed to help reduce the overall inequality levels.

UBI, if implemented, would cost the government around 4-5% of the GDP and would see 70% of the population receive Rs 650 per month according to the estimates done by the Indian Economic Survey. In this sense, India would implement a quasi-universal basic income.

The Wire: “Currently, there exist nearly 940 central sector and centrally-sponsored schemes, i.e. food and urea subsidies, where many of them are minute in terms of allocation and have existed for decades. The administrative costs alone for running these schemes are substantial, coupled with the leakages and the burden of identifying beneficiaries, which further places strain on governmental agencies that are often plagued with issues of inadequate capacity. If this is the case, why haven’t governments already introduced a scheme that reduces such burdens? With the introduction of UBI, subsidies such as kerosene and fertilisers will cease to exist, exposing various sections of the population to market risks. Along similar lines, this could possibly erode the pressures on the state to provide for health and education. These are significant problems that need to be considered. However, would the provision of Rs 650 per month help reduce inequality levels?”

The point is, says the writer, augmenting 70% of the population with fungible transfers does not create an equitable society. Therefore, as variants of the current model exist, the government should opt for an approach that brings about a greater balance to society.

An alternative approach could include the introduction of a negative income tax (NIT) as a social policy. We quote, “Currently, under 2% of the Indian population pays income tax. Simply put, as agricultural activity in the country is not taxable, a significant proportion of people are employed in the informal sector. As over 90% of Indians earn less than Rs 2.5 lakh annually and are hence exempt from paying income tax, a significant tax base doesn’t exist. The lack of adherence from certain sections of the population due to tax morale also plays a vital role in creating the difference between the number of citizens registered under the taxable bracket and those who file for income tax. The introduction of NIT would register people under a tax bracket, even though they would not be liable to pay taxes. In order to avail accrued benefits, individuals will have to register their income levels. In this regard itself, an NIT is superior to a generic UBI.”

But in a country as unwieldy as India, the administrative costs associated with the creation of such a system will be considerable.  We quote, “As most people are not liable or do not pay taxes, it could be difficult to implement such a programme. Wholesale macroeconomic changes are associated with significant costs.  As with other policy decisions, NIT will have its own set of problems that can only be solved with time. However, with the introduction of the NIT, we move one step closer in trying to bring about an equitable balance to society.”

Poverty cannot be wished away

Brookings, an American thinktank that conducts research and education in the social sciences, primarily in economics, metropolitan policy, governance, foreign policy, and global economy and development, has deduced that based on current projections, the world will not end poverty by 2030. Poverty will likely be lower by about 200 million people, but 438 million people, or 5 percent of the world’s population, will still live in extreme poverty.

So can the Universal Basic Income solve global inequalities?

A February 2017 report by UNESCO Inclusive Policy Lab, discussed how UBI is spreading and becoming front and centre in the public discussion. It asked, what if this idea, suggesting a flat income given to every citizen regardless of employment or social status, was part of the solution to today’s inequalities?

What about India specifically?  Milan Vaishnav, a senior fellow and director of the South Asia Program at the Carnegie Endowment for International Peace, recently discussed in the Washington Post just how loaded this question is at a time when nearly 900 million Indians will be eligible to cast their votes in nationwide general elections.

The point pits the ruling government’s announcement that it would guarantee 10 percent of university seats and civil service posts for the “economically weaker sections” of the populace untouched by existing affirmative action programs against Congress president Rahul Gandhi's unveiling of what is likely to be his party’s signature campaign priority: a universal basic income for poor families across the country. The official statement being, “We cannot build a new India while millions of our brothers & sisters suffer the scourge of poverty. If voted to power in 2019, the Congress is committed to a Minimum Income Guarantee for every poor person, to help eradicate poverty & hunger.

This is our vision & our promise.”

This was a political curveball right ahead of Friday's budget, though it offered no specifics, except an affirmation of intention.

Milan Vaishnav also points out that two opposition-controlled states — Telangana and Odisha — have already implemented a partial income guarantee scheme squarely aimed at lifting farmers’ incomes. More recently, the ruling party in the state of Sikkim — a BJP ally — has announced it will unveil a comprehensive universal basic income by 2022.

From the Post, "Implementing any large-scale income support program calls for two essential ingredients: state capacity and fiscal resources. Unfortunately, both are in short supply in India. The country’s social service plumbing is notoriously feeble: India’s welfare machinery suffers from endemic “leakage” (or corruption) and “poor targeting” (an inability to properly identify and deliver benefits to eligible recipients). Furthermore, India’s fiscal accounts are underwater. Last week, the International Monetary Fund’s chief economist flagged the country’s fiscal deficit as a major economic risk factor, especially in an election year prone to populist giveaways.”

The writer says that neither the Congress nor the BJP has grappled with the realities of implementing a universal basic income for 200 million rural households, but a proposal unveiled this week by a team led by Arvind Subramanian — the former chief economic adviser to the Modi government — provides a tantalizing blueprint for dispensing cash to India’s neediest citizens while potentially circumventing the country’s administrative infirmities. Subramanian, now a visiting lecturer at the Harvard Kennedy School, and his co-authors have called for the next Indian government to implement what they call a QUBRI, or a quasi-universal basic rural income for India.

We quote, “The idea is simple enough: The government would provide an annual lump sum payment to every poor rural household in India — no questions asked — as a financial safety net. The proposal suggests an annual transfer of 18,000 rupees (1,500 rupees per month) to each eligible rural household — about $250 annually. To target recipients effectively, the proposed QUBRI would exclude the richest 25 percent of households. Transfers would be sent electronically to recipient bank accounts, which are ubiquitous now even in remote areas thanks to a recent government effort to universalize banking access. The authors estimate the costs of the scheme would be around 1.3 percent of India’s gross domestic product — a significant chunk of which would come from eliminating a raft of regressive agricultural subsidies. This sounds wonderful in practice, but the politics are not nearly as cut and dry. For starters, if eliminating farmer subsidies were painless, the government would have done it a long time ago. Research suggests that many Indians are leery of giving up existing subsidies in favor of uncertain cash transfers.”

Moreover, the existing debate is exclusively focused on India’s rural dwellers when it is India’s urban population that is burgeoning as migrants flock to cities in search of opportunity. The inadequacy of formal-sector jobs and the abysmal state of urban amenities suggest it is only a matter of time before urban residents demand their share of government largesse.

And the last word? As Milan says, "For now, technical details will be left to the economists and opinion writers to debate. For India’s politicians, there’s an election to be won. But the question remains: Will the Indian electorate really be wooed by a mere promise of easy cash? In 2014, voters were drawn to Modi like a moth to a flame, swayed by his pledge of ushering in “acche din” (good times) for the Indian economy, generating millions of jobs and reviving India’s moribund investment cycle. Five years later, his promises remain unfulfilled and voters, for their part, have begun to expect more.”

A complex idea simplified

Prasanna Mohanty wrote in India Today this week, that Congress' promise to ensure minimum income guarantee for the poor has brought the UBI debate into the mainstream with the tempting prospect of a guaranteed, monthly basic income being dispensed to every single citizen of a country -- regardless of her social, educational or economic standing.

But the piece tried to go beyond the broad strokes in which the idea of UBI is painted to understand the fine print.

In 2016-17, as we pointed out earlier, the Economic Survey of India presented a model for UBI. The basic premise of the Economic Survey's UBI was: “A just society needs to guarantee to each individual a minimum income which they can count on, and which provides the necessary material foundation for a life with access to basic goods and a life of dignity.”

The piece says that The Economic Survey of India's model of UBI suggested providing Rs 7,620 per annum to 75 percent of India's population.

We quote, “Now, Rahul Gandhi's plan seems to target only the poor. Rahul Gandhi has not said whether his proposed minimum income guarantee will cover 22 percent of the population or 29.5 percent. Also, Rahul Gandhi has not declared what the "minimum income" has would be." Unquote.

So what is the essential difference between UBI and Minimum Income Guarantee? The answer is and we quote, “A universal basic income provides a monthly stipend that would ensure that a person would be above the poverty line without any other source of income. (Thus, the Economic Survey of India suggested a UBI of Rs 7,620 per annum). A minimum income guarantee, on the other hand, is pretty much at the discretion of the government of the day -- it can be equal, more or less than the poverty line expenditure.”

A way to liberty and equality? lists the  reasons that have all been invoked in Universal Basic Income’s favour, including liberty and equality, efficiency and community, common ownership of the Earth and equal sharing in the benefits of technical progress, the flexibility of the labour market and the dignity of the poor, the fight against inhumane working conditions, against the desertification of the countryside and against interregional inequalities, the viability of cooperatives and the promotion of adult education, autonomy from bosses, husbands and bureaucrats.

We quote, “The inability to tackle unemployment with conventional means has, in the last decade or so, become a major reason for the idea being taken seriously. Social policy and economic policy can no longer be conceived separately, and Basic Income is increasingly viewed as the only viable way of reconciling two of their respective central objectives: poverty relief and full employment. Grassroots activism for Basic Income has increased greatly since 2010. In addition, many prominent European social scientists have now come out in favour of it – among them several Nobel laureates in economics. In a few countries some major politicians, including from parties in government, are also beginning to stick their necks out in support of it. At the same time, the relevant literature – on the economic, ethical, political and legal aspects – is gradually expanding and those promoting the idea, or just interested in it, in various European countries and across the world have started organizing into active networks. Yet, the proposal also receives strong political resistance in most countries.”

For now, as a well-known economist and a former Prime Minister said on the cusp of India's economic liberalisation, we are witnessing an idea whose time has come.

The idea of UBI is however far more complex than it seems on paper. Its implementation will require more than just political grandstanding. As we have learnt over the years, promises are cheap in political lexicon. It is the implementation that is expensive and causes more harm that good when executed without enough rumination.
First Published on Feb 4, 2019 09:33 pm
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