Universal Basic Income: The Indian dilema

Source: By Sarath Davala: The Financial Express

With 1.3 billion population, the ‘universal’ part of the Universal Basic Income (UBI) is the most difficult to tackle in India. If we adhere to the purity of the concept and make it universal, then in the Indian context there is a great risk of diluting it since the amount that may be given to each individual may be too small to have any significant impact on people’s lives. That now pushes us back to targeting, which, through experience, we have seen that it is riddled with errors of both inclusion and exclusion. The question is: Whether targeting is inevitable to roll out a meaningful basic income? If that is so, it is necessary that we simplify it as much as possible?

A recent initiative by the Telangana government through its programme Rythu Bandhu is a case in point. This programme gave what the government called investment money to farmers twice a year at the time of the sowing season. In order to avoid targeting problems, the Rythu Bandhu programme was made both universal to all the farmers and also unconditional. All the 7 million farmers in the state were entitled to the money, and there were no conditions laid out at all—not even that a recipient farmer should necessarily cultivate her land. The recently announced PM-KISAN is a traditional model of both targeting and also adding exclusion criteria within the selected target population. But these schemes are addressing just one section of the population.

What do we do when we face a situation announced by Rahul Gandhi—the Minimum Income Guarantee for all the poor? How does one then give to all the ‘poor’? Is there a way of simplifying the challenge of ‘targeting poor’? We are yet to come up with an innovative way of addressing this issue.

Can there be another way of looking at this puzzle? Instead of searching for inclusion criteria, should we be looking at exclusion criteria? Even this route may not be easy to implement. If we exclude, for instance, all income-tax payers, the percentage of population we will exclude will be less than 5%. Arvind Subramanian, the former Chief Economic Advisor, speculated we should give basic income to all the women, which would ensure that the money goes to almost every household. This may be seen as discriminating against men. So, how do we solve this puzzle? That is our biggest challenge in India.

Coming to the two other elements, ‘individual’ and ‘monthly’, we observe that, in India, but for educational scholarships or old-age pensions, the general poverty alleviation grammar has always been to focus on the household. Lately, in the context of promoting women’s empowerment and agency, women members of the households have been the focus—interest-free loans, subsidised cooking gas, etc. Providing income stream to individuals as part of poverty alleviation has never been the strategy of the Indian welfare system. To effectively eradicate poverty, it is necessary that we take this leap and focus on the individual. The same applies to the idea of providing basic income every month since the regularity of income provides a sense of security and has a strong positive psychological effect on individuals.

Coming to the question of cash versus in-kind transfers, it appears that to a large section of the intelligentsia, the idea of giving cash to the poor is highly objectionable because of its fungibility. Basically, it is the mistrust in the poor—that they will not spend cash for the intended purpose, and that giving cash entails the risk that the recipients may use it for entertainment and temptation goods. That is the reason the tendency of the Indian state has always been to give subsidised or free goods such as foodgrains, cooking gas, blankets, bicycles, school bags and uniforms, sarees, etc. The global research evidence, however, points to the contrary. Even the findings of the Madhya Pradesh pilot study debunk the myth that the poor will misuse cash. This tendency of our politicians and policymakers smacks of a very deep-seated paternalism, which we need to change.

Then we have the question of understanding basic income as a ‘right’. For any basic income programme, there are two kinds of insurance necessary. One is insurance against the vagaries of political regimes. The best protection against this is to make basic income provision a law rather than just as a scheme, so that it cannot be withdrawn. Secondly, the real value of the basic income needs to be protected against inflation which means that it needs to be inflation-indexed so that the real value of the money does not get eroded with the passage of time and rise in inflation. We could think of a lead time of five years before we make a law.

Lastly the ‘unconditional’ nature of basic income, this is perhaps the most radical of all the elements of UBI, and also happens to be most alien to our welfare grammar. All welfare schemes have conditionalities because we see the task of poverty alleviation as a matter of charity—a paternalistic act of giving alms to someone who has fallen behind in the race. This attitude completely overlooks the fact that large sections of the population are in a state of deprivation because of unequal opportunities; and that they have the right to partake at least minimum support from the fruits of the community as a matter of right rather than as charity. Our excessive emphasis on private property and private inheritance hides the fact that natural resources and national wealth belong to the people collectively, and that the state is just a custodian. And that there is something called public inheritance and the members of a community have a right over this public inheritance. A major transformation of perspective is needed for us to see these distinctions.

Conditionalities are repugnant for another important reason. Conditionalities automatically create an army of inspectors and supervisors who get to wield enormous discretionary powers. This results in the worst forms of corruption, and results in wastage and leakages of welfare money.

Let me now conclude by emphasising that basic income is a good idea for India. It is the foundation of a more equitable and inclusive society. It provides to every citizen of India a minimum floor to stand on. To implement it meaningfully, however, we need to innovate on several fronts. And we can do that.