The on going health emergency coupled with the crashing economy has forced everyone to think about the ways of eliminating a long standing social issue, i.e., poverty.
According to a study of Azim Premji University published on may 5th 2021, titled “State of Working India 2021 – One year of Covid-19”, 230 million additional individuals have fallen below the national poverty line. This helpless situation of our millions of citizens brings us face to face again with the decades old question of how we can deal with poverty as a society to help improve the lives of our fellow citizens.
The concept of Universal Basic Income(UBI) has been doing rounds especially after the stringent lockdown was announced to curb the spread of Covid19 as a measure to curb the rising poverty. So what is this UBI?
Universal Basic Income in its true sense is the provision that would entitle every citizen an unconditional fixed sum of money. But since our primary objective is to curb poverty, therefore we will focus on controlled UBI, i.e., entitling the unconditional fixed amount to only a certain group of people which need it the most for their survival.
Till now if we exclude Kenya and Iran, where a big unconditional cash transfer program is going on, the universal basic income programs have been tried only on a few groups of people and not an entire polity. Therefore we can say that they are offering a basic income and not a universal basic income.
But these pilot projects on a small scale are necessary since the government wants to make sure that there are certain positive effects of this program before spending billions from their purse. The supporters of basic income says that it’s the best way to endpoverty, it will boost happiness, health, nutrition and that it will help the society to cope up the job losses which would be triggered by the continuous automation of services and labour.
At the same time, the opponents of basic income says that this scheme would disincentivize work and it is unaffordable for the government to pay every citizen. Supporters of this scheme include Economics Nobel Laureates Peter Diamond and Christopher Pissarides, and tech leaders Mark Zuckerberg and Elon Musk. With the different data sets and studies that is available to us, let us try to find out whose argument stands.
Pilot Projects Around the World
In Alaska, since 1982 the government has given every citizen an unconditional amount which ranged from $2000 to $1000 depending on the prices of the oil. The analysis of the economists found out that there was no effect on employment but instead had a good effect on fertility and wiped out extreme poverty successfully.
Therefore the worry of the critics that this scheme would disincentivize work does not hold true. In another program in North Carolina(USA), the revenue from a casino on a tribal land has been shared with every tribal member unconditionally. The economists found that this additional income did not make them work less but instead lead to improved healthcare, education and a decrease in crime.
Canada ran a randomised controlled trial in the province of Manitoba between 1974 to 1979. The outcome was that the additional income benefitted the mental and physical health of the residents as there was a decline in doctor visits and a reduction of 8.5 percent in the rate of hospitalisation. The rate of high school graduation also improved.
In a more recent study which was conducted in 2017 by the government of Finland, it chose 2000 unemployed citizens at random and gave them 560 Euros every month for a couple of years. It was found that the participants were happier and less stressed on receiving the income. It was also found that they built more trust towards the social institutions than they did before getting the basic income.
On moving to South America, we have Brazil where the government is experimenting with cash transfers to poor families known as the Bolsa Familia program. The beneficiaries are expected in return to keep their children enrolled in educational institutes and visit health centres regularly. So this program directly effects the education and health of the most vulnerable in a positive way.
If we move towards Africa then we have Kenya where the longest UBI experiment is taking place. The charity GiveDirectly is giving money to more than 20000 people across the rural areas of Kenya. It started in 2016 and gives 75 cents per adult per day for 12 years. The preliminary results are not yet out but these cash transfers have stimulated the economy and benefitted not only the receivers but also the people of the nearby villages.
Moving on to Asia, we have a pilot project that was conducted in our very own country, India. Between 2011 and 2012, a pilot project in the state of Madhya Pradesh was launched which gave a basic income to 6,000 citizens. The project was funded by UNICEF and included two studies.
In the first study, every citizen in 8 villages received a monthly payment of 200 rupees for adults and 100 rupees for each child. After a year the payments were increased to 300 and 150, respectively.Meanwhile, 12 villages received no income which acted as a control group.
In the second study a tribal village was selected and it received 300 rupees per adult and 150 rupees per child for the entire trial. Another tribal village acted as the control group. The results found that giving a basic income improved the sanitation, nutrition and school attendance.
So from the above worldwide pilot projects and their results we can conclude that Basic Income do improve the health, nutrition, sanitation, education, quality of life of people and is a powerful tool to eliminate extreme poverty.
Now the question arises that what does the Indian government think of this idea? Is it a feasible option for a middle income country like India which has a massive population, much diversity, high rate of poverty and inequality?
The Indian Debate
Indian government do consider Universal basic income as a genuine method as National Human Rights Commission(NHRC) in its report has informed the United Nations Human Rights Council(UNHRC) that the implementation of universal basic income which was recommended by UNHRC was under examination and active consideration by the centre.
Basic income before was discussed only by different intellectuals, think tanks, etc but it was in 2016 when officially the government of India put this idea on record. It was the Economic Survey of 2016-17 that proposed a quasi-basic income scheme which would exclude the well off population to alleviate poverty and extreme hunger.
The Economic Survey placed the fiscal cost of this scheme at ₹7,620 at a 75% universality which was 4.9% of GDP. A scheme on par with the numbers of the economic survey would mean an increase of nearly 40,000 rupees per annum for a household since an average household consist of approximately five members. This increase, if not substituted for other welfare schemes and basic services provided by the government, is surely a big boost in uplifting the living standard of our fellow citizens.
But the economic survey recommended this scheme as an alternative to various subsidy focused social welfare schemes that aim to reduce poverty. This was recommended based on a survey on misallocation of resources for the six largest central sector and centrally sponsored sub-schemes across districts.
The economic survey pointed to that the districts where the needs are the greatest are the ones where the state’s capacity is the weakest. Therefore the economic survey recommended a more efficient way, i.e., giving the resources directly in the hands of the needy, through UBI.
There are many implementation challenges of such a scheme in India due to the high corruption, high number of beneficiaries, a big digital divide, poor access to banks for rural people, etc. Therefore without proper implementation UBI can not become a replacement for other social welfare schemes but only an add on, which is financially not a sound idea for a middle income country.
One more point here is that the market access is quite limited in our country and the basic services such as school, health, food grains, etc of the private sector is way too expensive for the poor people even with the universal basic income in hand, so the government must keep providing these services to the poor at a nominal charge or even free of charge and UBI should not be a replacement for these services provided by the government.
To counter the corruption in implementation of universal basic income we can use the system of JAM(Jan Dhan, Aadhar and Mobile) which is already functional, to directly transfer the money into the accounts of the beneficiary. This would eliminate the role of any middle men who usually is the reason for corruption and delay. A cost sharing negotiation between the centre and state is also a necessity for the successful implementation of a basic income program.
The Government of India has already started a scheme which can be called a limited version of UBI which is targeting a specific group, i.e., Farmers. It is known as the Pradhan Mantra Kisan Samman Nidhi Yojana(PM-KISAN) which promises Rs. 6,000 per annum to farmers who own less than 2 hectares of land. This a step in the right direction, however, there is also a strong case for direct income transfers to some more groups such as landless labourers, agricultural workers and marginal farmers who suffer from multi-dimensional poverty.
These groups have not been benefitted from the economic growth and till now the various welfare schemes have failed to bring them out of the poverty line. The additional income given can help them to escape the informal moneylenders and the debt trap which follows. Several studies, some of which we have discussed above have shown that at this level even a small income support can improve the nutrition and school attendance of the students that come from a poor household.
This scheme would have three sided benefits, firstly it will bring a large number of families out of the poverty trap, secondly it will reduce income inequalities and thirdly the increase in the income will increase the demand which will further promote the economy of the area. Another problem could be the identification of the needy.
For that we can use The Socio-Economic and Caste Census(SECC) 2011. The groups which suffer from multi dimensional poverty such as manual scavengers, the shelterless, former bonded labourers, etc are all included in SECC. For including the small farmers who are not included in the SECC, can be identified using the Agriculture Census 2015-16.
These two datasets can be used to identify the poorest and neediest Indians, especially in rural areas where the welfare schemes have failed to reach properly. The fiscal challenge can be dealt by aligning different schemes such as PM KISAN which has a budget over Rs. 75,000 crores with the basic income scheme.
The states also need to share the fiscal cost with the centre to make it possible. A new cess can be levied for fund collection for the basic income scheme as was done for the Swachh Bharat mission. The wealth tax can be reintroduced which was abolished in 2015, that will be levied on the super rich and will be used for the extreme poor.
Some demerit subsidies such as on urea which is Rs 70,000 crore annually can be done away with to open up some fiscal space. The income transfer scheme is costly. However, the cost of constant poverty is much higher.
We should not confuse the additional income as unemployment benefits. Some people say that instead of giving direct money the government must empower them to make their own money by focusing on human development through various vocational training courses. They see UBI as an escape of the government from the responsibility of creating human capital. But this is not the case.
The additional income should not be a substitute for human development services but only an add on to compensate the less advantaged for the policy failures, to compensate them for the disproportionate share of growth of income and the growing inequality after the liberalisation, privatisation and globalisation process.
This is just a way to improve equity till the time a better economic model is implemented which would focus on inclusive growth and will lessen the gap between the rich and the poor. The added advantage of a basic income scheme would be that it will cover the urban poor also who are not given any assurance under the Mahatma Gandhi National Rural Employment Guarantee Act(MNREGA) and a confirmed unconditional income will help them to come out of some low productivity work and look for better employment opportunities.
Another issue is that what if the given income is not spent on productive activities such as health education, etc? We know the patriarchal mindset of our society, especially in the rural areas and we also know about the addiction of male members towards alcohol, gambling, tobacco, etc. What if the male of the house spends the entire additional income on these?
A solution to this could be to transfer the additional money directly into the account of a woman member of the household. This has been done during the current covid19 crisis induced lockdown too when Rs 500 were sent into the Jan Dhan accounts of rural women. Through this the money will be kept in the custody of the women members who are less likely to be addicted towards alcohol and gambling. It is found that women are also more empathic towards the need of their children and family.
The pandemic has affected the economy in a very negative way and many economists believe that the problem is in the demand side and not in the supply side. They believe that the pandemic has exhausted the savings of the households, be it because of the hospital bills or due to no income during the lockdown period. Further the people are trying to save more instead of spending due to the uncertain future.
Therefore these economists feel that at least there should be a short term UBI plan so that the direct cash in the hands of people can generate the demand and bring the economy back on track. Since people can also try to save this money too in their savings account, yet another idea can be to give people time bound income transfer in the bank account that they have to use within a fix period of time else the government will take it back and for non account holders can issue time bound tokens that are guaranteed by the government of India which can be used to as a legal tender till a specific date. This way a short term UBI scheme can even help in reviving the economy.
Some people argue that such a scheme would trigger inflation but I feel that such a minimal income transfer which could barely help them with an extra packet of milk or pulses would hardly have an impact on inflation. A case can be that after getting a basic income people can refuse to work as agricultural labourers or can ask for higher wages which would increase the cost of agricultural production. A Basic Income plan needs to be rolled out to find out more information for this point since the pilot projects do not have much to tell regarding this.
UBI is not a silver bullet that will cure inequality or poverty but it has a potential to work best as a complement to the other poverty eradication schemes. The American President Franklin D. Roosevelt rightly said, “The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little.”
The issue of poverty has been haunting our country since decades. We have tried many schemes to put an end to this in the past and have been successful in bringing a significant people out from the poverty trap during the period of 2005-06 to 2015-16 in which over 27.1 crore people were brought above the poverty line. But still a lot needs to be done. We need to try and implement some innovative and promising ideas to get better and quick results.
Universal basic income is one of them. The fiscal costs should not act as a deterrence for the government to not think about it. The government, officially in its own capacity can conduct a large scale pilot project, in lines with the Finland pilot project, which could include people from diverse backgrounds, diverse professions, regions, etc for a better analysis from an Indian point of view.
It could be a long and vast study that can even include the mental and emotional state of the participants. Based on the results of such an in depth study the government can move forward on deciding whether the UBI scheme is worth it. The aim of our country should be to provide every citizen a life with dignity.
It is also a fundamental right under article 21(Right to life, which has been further elaborated by the honourable Supreme Court of India) of our constitution. The UBI scheme would pressure off the poor from struggling for basic needs and will give them dignity. They would no longer have to forcefully do inhuman works such as of a manual scavenger, just for the fulfilment of basic needs.
This can even bring a revolution in the view points of some elite privileged individuals who see and treat them as third class citizens only because these people are dependent for basic food on them, since the people will no longer work where they are not treated with dignity if they will be getting a basic income from the government.
It will break the misconception of these elite people that they are masters of the poor people. A Universal Income Scheme would liberalise the poor people from the invisible chain of obligation they are tied to because their food needs is dependent on someone.
By- Aaryan Kumar