New Delhi: The idea of a universal basic income has gained currency in the West because of the threat of automation-induced job losses. In India, the idea first gained currency as a solution to chronic poverty and government’s failure to effectively target subsidies towards the poor. Amid persistent farm distress and weak wage growth across occupations, the idea of an income support scheme seems to be gaining ground once again. Some advocate an income support scheme for farmers while others advocate a broader income support for all . Still others, such as the former chief economic adviser Arvind Subramanian favour an income support scheme targeted towards the poor, that is, a non-universal basic income. The idea of an income support scheme for farmers draws from the Rythu Bandhu scheme initiated by he Telangana government which may have helped the Telangana Rashtra Samithi (TRS) government storm back to power. Unlike farm loan waivers or minimum support prices for specific crops, a Rythu Bandhu-type income support scheme does not damage credit culture or distort markets. However, the Rythu Bandhu scheme excludes tenant croppers who consist of around 13.7% of farm holdings all across India. Under Rythu Bandhu, the government provides ₹ 4,000 per acre per season to support farm investment and it is up to the landlord to pass on the benefit to the tenants. Even in its current form, extending the scheme across India will cost a prohibitively high amount of ₹ 3.1 trillion in one year alone. Viewed over the period of five years—the term of one government in India—a Rythu Bandhu-type scheme would cost much more than the farm loan waivers recently announced across states. Moreover, such a farmer-specific scheme might encourage people to remain tied to agriculture, a relatively less productive sector of the economy. Compared to a farmer-centric scheme, universal basic income holds greater appeal as it does not discriminate based on occupation or land ownership, and does not depend on accuracy of targeting to work. But the challenge with universal basic income is the prohibitive costs associated with it. Providing all individuals with a poverty line-equivalent universal basic income ( ₹ 1,180 per month for each individual, in 2017-18 prices) would cost around ₹ 19 trillion or 11.4% of gross domestic product (GDP). This would be 50% more than centre’s total tax revenues, and would certainly not be sustainable. However, even much lower levels of universal basic income might suffice in improving the lives of the poor. For instance, a 2011 study by United Nations International Children’s Emergency Fund (UNICEF) and the Self Employed Women’s Association (Sewa) in rural Madhya Pradesh showed that providing ₹ 300 per month to each adult and ₹ 150 to each child can make a big difference to the lives of the poor. In 2017-18 prices, it amounts to around ₹ 18,000 per year for a family of five: two adults and three children. A similar amount, ₹ 16,000 per year to a household of five, has been suggested by the renowned development economist Pranab Bardhan. Such a universal basic income support (universal basic income) would cost around ₹ 4.3 trillion or 2.6% of GDP. Even such a scheme is feasible only if the centre trims current subsidy and welfare expenditure. Some of these schemes including the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are often deemed to be leaky and poorly targeted although opinion among economists is divided on this issue. Some think that these schemes are beyond redemption and should be replaced by a guaranteed income while others consider schemes such as MGNREGA to be better alternatives to universal basic income, if only targeting could be improved. The various schemes of the central government, which can potentially make way for a universal basic incomes together amount to around 3% of GDP, including food subsidy under the public distribution system (0.84% of GDP), MGNREGS (0.33% of GDP), fertilizer subsidy (0.4% of GDP), petroleum subsidy (0.15%), and miscellaneous subsidies and revenue foregone due to tax exemptions. Given that the withdrawal of state support across so many sectors could be highly disruptive, some economists advocate a partial and gradual withdrawal. The development economist Reetika Khera has suggested that the move towards universal basic income should start with a ‘universal’ pension of ₹ 1,000 per month to the easily identifiable groups of elderly, widowed, and disabled . Additionally, the government should ensure maternity entitlements of ₹ 6,000 per child. Such a scheme would cost a relatively manageable 1.3% of GDP. It is little wonder that in a quasi-federal democracy such as ours, state governments have taken the lead in starting different varieties of income support schemes. However, it is worth keeping in mind that several state governments do not have the fiscal space to launch even a watered-down version of a basic income support scheme. What form an income support scheme eventually takes will ultimately depend as much on economic motivations as on political ones. But regardless of the form it takes, the idea of an income support scheme or direct cash transfers is here to stay for some time. Two of India’s former chief economic advisers—Kaushik Basu and Arvind Subramanian—can take some credit for that. Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter. Never miss a story! Stay connected and informed with Mint. Download our App Now! ! Topics<doc-sep>The government is expected to budget around Rs 32,000 crore for April-June 2019. The government is expected to budget around Rs 32,000 crore for April-June 2019. With its legislation on a 10 per cent quota for the general category poor in jobs and education getting parliamentary backing in the run-up to the Lok Sabha elections, the BJP-led government is now exploring the possibility of providing direct benefit transfers to those below the poverty line (BPL) through a universal basic income (UBI) and for farmers through direct investment support. According to sources, the government may announce a UBI of Rs 2,500 per month initially to families below the poverty line. The money would be directly transferred to this section while ending other sops such as food and LPG subsidy to them, the sources said. The UBI dole is expected to take care of half the nutritional requirements of a family of five in rural areas and one-third requirement of those who make the urban poor. The government is expected to budget around Rs 32,000 crore for April-June 2019. Sources said the actual number of beneficiaries would depend on the funds that the Reserve Bank of India transfers to the national exchequer. Persons below poverty line are estimated to be 27.5 per cent of the country’s population. The 2017 Economic Survey had flagged the UBI scheme as “a conceptually appealing idea” and a possible alternative to social welfare programmes targeted at reducing poverty. The UBI was signalled in the BJP manifesto for the assembly elections in Rajasthan where the party said it would arrive at the income figure “after taking into consideration (the beneficiary’s) income from various sources and the government benefits (he receives)”. For the farmers, who comprise 47 per cent of the country’s population, the government is considering an adaptation of Telangana’s Rythu Bandhu scheme where farmers tilling less than an acre of land would be given Rs 4,000 per acre, or a proportion thereof depending on the size of land holding, for each of the two cropping seasons — Rabi and Kharif. The money for transfers to farmers would be shored up by discontinuing the subsidies on fertilisers and seed, the sources said, indicating that a clear picture of the scheme would emerge in July — the start of the cropping season. Transfers to farmers would be dispensed with after an updation of land records with recognised tenancy by the state to ensure that it does not go to the landowner. The states, in turn, would be encouraged to establish lease farming as an integral part of index of Ease of Doing Agri-Business. The government is also considering the possibility of providing interest-free loan up to Rs 1 lakh for these farmers with landholding below one acre. The two-pronged strategy is expected to take care of the small land owners as well as that of the tiller-farmer which voted out the BJP in the Hindi heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh.<doc-sep>Since UBIS is to be given to the rich and the middle classes as well, it can be expensive. Since UBIS is to be given to the rich and the middle classes as well, it can be expensive. After my last op-ed in this paper (‘The safety net of the future) several readers, intrigued by the idea of a Universal Basic Income Supplement (UBIS) proposed in the article, asked me to elaborate. Hence this article. There are reports that the ruling party in Sikkim has announced UBIS in its election manifesto, and, more intriguingly, the Centre is considering such a measure “for people below the Poverty Line”. The latter is a contradiction in terms: UBIS is an unconditional grant to all citizens, not just to the poor — that’s what “universal” means. As I wrote in my earlier piece, many people, who are much above the official poverty line, suffer from variety of insecurities — farmers, of course, face weather and market risks but non-farmers also face several kinds of risks, including in their jobs, often in the informal sector, where some of them are refugees from agrarian and ecological distress or are victims of the recent disaster of demonetisation. UBIS avoids the problem of deciphering who is poor and who is not, which is an intricate problem in India — the India Human Development Survey found that in 2011-12 about half of the officially poor did not have the BPL card, while about one-third of the non-poor had it. In any case I look upon UBIS not as an administratively easier anti-poverty programme; to me it is more a part of a citizen’s right to minimum economic security, a right which many countries recognise, but so far India does not, even though it should easily fall under the Supreme Court’s interpretation of the “right to life” in the Constitution. I am often asked: Do you want the government to give money to the Ambanis as well? My answer is yes, as citizens they are entitled to it, just as they have the right to get police protection, even though they can afford their own protection. (If in practice some rich people do not claim it or if there are transparent ways of excluding them — for example those above a certain threshold in income tax return or owning cars, etc. — I will not object strenuously, even though the conceptual point of a citizen’s right remains). Since UBIS is to be given to the rich and the middle classes as well, it can be expensive. In my earlier piece, I suggested funding it from reducing some of the subsidies that are at present enjoyed mainly by the better-off, also taking a bit from the various tax concessions mostly to business (called “revenues foregone” in the Central Budget), and taxing the currently exempt wealth, inheritance, and long-term capital gains, and collecting more taxes from the currently under-assessed and under-taxed property values. Only a quarter of the 10 per cent of GDP thus potentially mobilisable could go to UBIS; the rest can be spent on infrastructure, health and education. This allows roughly a grant of about Rs 16,000 to each household. If, to start with, it is given only to women, it’ll halve the cost (in my earlier piece there are typos in the cost estimates given for UBIS for only women; the correct amount should be about Rs 2.1 trillion, at 1.25 per cent of the GDP). The special treatment to women is recognition of the hard work most of them do for their households, and outside. It is also a means to raise their (currently low) autonomy and status within the Indian family. Of course, the better-off (businessmen, large farmers, the salaried class) will not easily give up on the subsidies they have enjoyed all these years or pay substantially more taxes. But without that, if UBIS merely adds significantly to the fiscal deficit or is funded by scaling down some of the current major anti-poverty programmes, then I’ll be generally against it. It will only show that the policy-makers are politically afraid to touch the rich. (This does not mean that the current anti-poverty programmes do not need to shed their waste and inefficiencies). I think packaging a significant UBIS with a simultaneous increase in the taxes on the rich will help macro-economic stability, apart from assuaging the poor who will face some of the price rise in commodities or services, when subsidies are withdrawn (for example, the price of urea will rise for all farmers, if the fertiliser subsidy is curtailed, even though most of the subsidy goes to large farmers and factories). It is also important to keep in mind that if the declared UBIS amount is too small, only serving as a rhetorical token before elections, people will see through it as another electoral “jumla”, too many of which have been associated with the current regime. Then there are some practicalities of UBIS any policy-maker has to consider. One, how do you reach everybody in India when many people still do not have bank accounts or access to banking agents (although once such a programme starts, banking agents are likely to be induced to expand their operations, as fixed costs are spread out over larger numbers)? Two, Aadhaar or some other form of identification will be necessary, but the horror stories one has heard about the poor being denied PDS because of the lack of Aadhaar authentication make one wary of bureaucratic callousness in this respect. Three, UBIS needs to be transparently linked right from the beginning to some cost of living index — this is particularly important because of the callous way Indian governments have let their contribution under the National Old Age Pensions Scheme stagnate at a measly Rs 200 per month per pensioner for the last 12 years. Four, UBIS could be different for adults and children, but one probably should not go that way because in the absence of proper age records it may give an opportunity to some corrupt officials. Five, how should the grant money be allocated between the Centre and the states?<doc-sep>In 3 years if voted back to power in Sikkim: Chamling’s party (Source-File) In 3 years if voted back to power in Sikkim: Chamling’s party (Source-File) Sikkim will be the first state to roll out Universal Basic Income (UBI) and has started the process to introduce the unconditional direct cash transfer scheme. Sikkim’s ruling party, the Sikkim Democratic Front (SDF), has decided to include UBI in its manifesto ahead of the Assembly election in 2019 and aims to implement the scheme by 2022. The 2017 Economic Survey had flagged the UBI scheme as “a conceptually appealing idea” and a possible alternative to social welfare programmes targeted at reducing poverty. Speaking to The Indian Express, Prem Das Rai, SDF MP in the Lok Sabha, said: “Our party and Chief Minister Pawan Chamling, who is the longest serving Chief Minister, are committed to bringing in Universal Basic Income. This, we will do three years of coming back to power in the state.” “UBI is a scheme that a number of economists have talked about and it works well in developing countries. It has been tested even in India, debated within the Finance Ministry as early as 2017,” he said. “It has been tried in Gujarat, Madhya Pradesh and tribal belts with fairly large samples and it has shown it works. Basically, its an income given to families irrespective what do they do. In Sikkim, it will be for everyone and every household.” The SDF government has already considered the “affordability” of the scheme. The successful implementation of the hydropower projects by the state has made it a surplus power generating state. “The state produces 2200 MW and it will go up to 3000 MW in the next few years. The state’s requirement is only 200-300 MW and the rest goes to power trading firms. When this money comes in, we as SDF feels its people’s money and it should be utilized for them.” The SDF appears confident of returning to power as it dominates the political space in the state. Rai said that despite being part of the BJP-led Northeastern Democratic Alliance (NEDA), his party will go it alone in the election, which is due along with the Lok Sabha polls. “The process has already started in Sikkim,” he said. The idea is to subsume other subsidies and allowances in order to provide a particular amount every month to people. Rai said it would “work well for the youngsters” because “it would give freedom to choose their work, it will be more futuristic and it will serve as a future production tool. Young people can look into the future without worrying too much about income,” he said adding that UBI should not be looked at as a “sop”. “It’s, in a way, trusting your people to do the best in a responsible manner,” he said. “This kind of measure could iron out some of the social evils we are seeing in our society today.” Sikkim has a literacy rate of 98 per cent and its monthly per capita expenditure in rural areas is Rs 1,444.06 and it is Rs Rs 2,538.11 for urban areas. The BPL percentage has come down from 41.43% in 1994 to 8.19% in 2011-12. Admitting that there could be some “misusing” Rai said studies in many countries and in India have proved that it will work. He said the state has improved drastically and its development indicators and the state government wanted to share the prosperity with its citizens. “We are sure other states will follow us,” he said. “As far as I remember even Prime Minister Narendra Modi also talked about Universal Basic Income. Anyway, its an idea whose time has come,” he said. The state will also restructure some social schemes and the “skewed” tax structure to find more resources. With tourism being another source of revenue for the state – the state gets around 2.5 million tourists a year – there could be some cess in future to generate additional resource to implement the scheme. “It’s not just a feasible idea, but a very positive idea,” he said, adding that finer details were yet to be worked out.<doc-sep>
A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work. (Illustration: Suvajit Dey) A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work. (Illustration: Suvajit Dey) Sikkim is set to become the first state in India to roll out Universal Basic Income (UBI), an idea that is, like many rights, both unconditional and universal — one that requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens. Sikkim’s ruling party, the Sikkim Democratic Front (SDF), which has decided to include UBI in its manifesto ahead of the Assembly elections later this year and aims to implement the scheme by 2022, has already started the process to introduce the unconditional direct cash transfers. As an idea, UBI has been hailed by both left-leaning thinkers such as John Kenneth Galbraith as a means of fostering social justice and equal opportunity, as well as those on the right, including Milton Friedman, as a way of restoring individual choice and freedom and reigning in the influence of the state. The 2017 Economic Survey had flagged the UBI scheme as “a conceptually appealing idea” and a possible alternative to social welfare programmes targeted at bringing down poverty. The idea and its appeal While India has made considerable progress in bringing down poverty from about 70% of the population at the time of independence to about 22% in 2011-12 (Tendulkar Committee estimates), the effectiveness of the targeted schemes run by central and state governments have always been in question. Studies and government audits reflect the data manipulation and leakages that characterise the system, with the poor and deserving crowded out of BPL card ownership and the rich reaping undeserved benefits. Targeting is seen as being both inefficient and inequitable, a licence for corruption that has spawned an entire industry of middlemen. UBI envisages an uncompromised social safety net that seeks to assure a dignified life for everyone, a concept that is expected to gain traction in a global economy buffeted by uncertainties on account of globalisation, technological change, and automation. The Economic Survey 2017 devoted an entire chapter to its merits, concluding that “the Mahatma would have been conflicted by the idea but, on balance, might have endorsed it”. How UBI works A basic income is a regular, periodic cash payment delivered unconditionally to all citizens on an individual basis, without requirement of work or willingness to work. The five broad features of such schemes are: payments at periodic regular intervals (not one-off grants), payments in cash (not food vouchers or service coupons), payments to individuals, universality, and unconditionality. Typically, UBI would require subsumption of other subsidies and allowances in order to free up resources so that a particular amount can be directed to people on a periodic basis. The differences among the several models being tried out across geographies relate mainly to the scale of the project, quantum of income, source of funding, and cuts in other transfers. Global precedents Several governments have tried out UBI policies. Finland recently concluded a two-year experiment on its effects on unemployed citizens, which commenced in January 2017. Earlier, the government of Ontario, Canada, had announced a plan to test a kind of unconditional income guarantee, and enrolled participants in three areas of the province for a guaranteed income for up to three years. Some cities in the Netherlands have launched municipal-level trials. Barcelona in Spain has tested several potential changes to its anti-poverty programmes, including unconditional cash payments. Among nongovernmental attempts, two US-based nonprofits have completed pilot studies and are preparing to launch privately-funded basic income experiments on a large scale, according to data compiled by Kate McFarland of the Basic Income Earth Network. The charity GiveDirectly is reportedly working on plans to initiate a 12-year randomised controlled trial (RCT) to test the effects of UBI in villages in rural Kenya. The Silicon Valley nonprofit research lab Y Combinator Research has completed a feasibility study in Oakland, California, and is now finalising the design of an RCT that will involve 3,000 participants in two American states. In September 2018, nearly 600 people signed up for a UBI experiment launched by Swiss filmmaker Rebecca Panian in the northern Swiss town of Rheinau.