[op-ed snap] Basic income works and works well

Note4students

Mains Paper 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

From UPSC perspective, the following things are important:

Prelims level: Basics aspects of Basic income.

Mains level: The news-card analyses the issues and challenges in the implementation of Basic income policy, in a brief manner.


Context

  • In 2010-2013, three basic income pilots in West Delhi and Madhya Pradesh, in which over 6,000 men, women and children were provided with modest basic incomes, paid in cash, monthly, without conditions.
  • Although the money was not much, but it was paid individually, with men and women receiving equal amounts and with children receiving half as much, paid to the mother or surrogate mother.
  • The pilots involved the Self-Employed Women’s Association (SEWA) and financial assistance from UNICEF and the UNDP.

Background

Basic income: A ripe idea

  • The international debate on basic income has advanced considerably in the past five years. Experiments have been launched in countries of different levels of per capita income, which include Canada, Finland, Kenya, Namibia, the Netherlands, Spain and the U.S., with plans being drawn up in England, Scotland, South Korea and elsewhere.
  • India could take the lead since it has the technological capacity, the financial resources and, above all, the need for a simple, transparent scheme to liberate the energies of the masses now mired in economic insecurity, deprivation and degradation.
  • In the 2017 Economic Report tabled by the government there is a chapter on how a basic income could be rolled out across India, and is affordable.
  • Its main author, former Chief Economic Adviser Arvind Subramanian, and others such as Professor Pranab Bardhan have proposed ways of paying for it — primarily by rolling back existing wasteful, distortionary, and mostly regressive subsidies.
  • This should not be an issue to divide the left and right in politics, and it would be wonderful if the main political parties and personalities could come together on it.

Issue

Learnings and outcomes from the pilots

 

  • The outcomes exceeded expectations, because everybody in the community, and not just select people, received their own individual transfer.

 

  • Nutrition improved, sanitation, health and health care improved, school attendance and performance improved.
  • Further, women’s status and well-being improved, the position of the disabled and vulnerable groups improved by more than others.
  • Also the amount and quality of work improved.
  • For critics it would be a waste of money, but they were proved wrong.
  • Above all, the basic incomes improved the community spirit and were emancipatory. Those who do not trust people wish to retain paternalistic policies despite decades of evidence that they are woefully inefficient, ineffective, inequitable and open to ridiculously extensive corruption. The tendency of elites to want to have common people grateful to their discretionary benevolence has blocked sensible economic reform.

Challenges

  • Planning the phased implementation of basic income will be a serious but manageable challenge. It will require goodwill, integrity, knowledge and humility about what will be inevitable mistakes.
  • If properly planned, it is possible to introduce a comprehensive scheme even in rural or urban low-income communities, without too much cost.
  • But it is essential to obtain local cooperation and awareness at the outset, and the backing of key local institutions.

Recommendations

  • It is strongly recommended that if the government is to go ahead, it should phase in the scheme gradually, rolling it out from low-income to higher-income communities, after local officials have been trained and prepared.
  • It is also recommended that the authorities should not select particular types of individuals and give it only to them.
  • It is tempting to say it should go only to women, low-income farmers, or vulnerable social groups. That would be wrong. It would involve expensive and corruptible procedures, and risk evoking resentment in those arbitrarily excluded, who would probably be equally in need, perhaps more so.
  • What administrators often do not appreciate enough is that money is fungible. If money is given only to women, men will demand a share; some women will give in, some will resist; it will be divisive.
  • In the pilots it was found that if men and women all have an equal individual amount, it promotes better and more equal gender relations. Moreover, giving to all in the community fosters solidarity within households and the wider community, apart from enabling multiplier effects in the local economy.

The contrast: Farm loan waivers

  • No doubt farm loan waivers policy would lessen the burden on a hard-pressed social group, and lessen rural poverty, but it is a populist measure.
  • It will be popular, but will not alter structures and is bad economics.
  • Suppose the principle were generalised. If one type of loan could be declared non-repayable, why not others? Unless one can show that a debt is odious or illegal per se, it would be a dangerous precedent to declare that one type of debt and not others need not be repaid.

Way Forward

  • In the long term, financial institutions would be less likely to extend loans to small-scale farmers. That is not the aim.
  • If the loans were made on fair rules, it would be better to enable the debtors to pay them back less onerously. That is why a basic income would be a more equitable and economically rational way of addressing what is undoubtedly an unfolding rural tragedy.
  • The beauty of moving towards a modest basic income would be that all groups would gain.
  • That would not preclude special additional support for those with special needs, nor be any threat to a progressive welfare state in the long term.
  • It would merely be an anchor of a 21st century income distribution system. The politicians must show the will to implement it.
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