Universal Basic Income (UBI) in its pure form implies six essential ingredients. It is universal, individual, cash, monthly, unconditional, and lastly it is a right that cannot be withdrawn. As a full-fledge social policy, it has not been implemented anywhere in the world yet. In the last decade, suddenly there has been an explosion of interest in the idea – in the universities, mainstream media, and policy corridors. Political Philosopher Karl Widerquist of Georgetown University calls the current wave of enthusiasm and activism the third wave. The first wave was between 1910 and 1940 and the second one in the 1960s and 1970s, he observes. While the earlier waves had been sporadic, the current one seems to be the longest one.
By universal, we mean that all residents of a particular territory of a nation-state are entitled to a basic income simply by virtue of being a resident of the territory. Being universal has two important advantages. One is administrative efficiency. Income transfer bypasses all the limitations posed by the errors of targeting. In India particularly, we have not been able to resolve the question of targeting. Most of our welfare programs suffer from both inclusion and exclusion errors. The second advantage is called the ‘solidarity effect’. By giving it to everyone, UBI ceases to be a welfare scheme or a subsidy and all the stigma, paternalism, and disapproval that’s attached to it. Pragmatic questions remain whether we can afford it, but we will come to that later.
By individual, we mean that every single individual – adult or child – is entitled to a UBI, as opposed to giving it to the household. This aspect of UBI accords economic citizenship to each and every individual and this is said to have the ‘empowerment effect’. Individuals are empowered because entitlement to UBI provides individuals a sense of worth and protects individual freedom. On the contrary, if the UBI is given to the household, a woman who is living in a violent marriage would be forced to continue in it just to have basic income security.
By cash only, we mean that it should not be in-kind transfers. It should be cash only and should be delivered efficiently to individuals and ought to be leak-proof. Today’s technology allows this kind of direct transfer.
By monthly, we mean that the UBI should be given every month so that people have a regular, predictable and reliable income stream. This has strong implications for the rate of time preference of the poor. In general, the rate of time preference of the poor households is very high, which means that they tend to focus on present rather than on future. In other words, what they earn they are forced to consume in the present rather than have any kind of future orientation in terms of savings or investment in human capital. When they experience a regular income stream, this changes substantially, and they tend to develop a future orientation – which means they begin to balance their current consumption and investments for the future.
By unconditional, we mean that there should be no conditions whatsoever – ex ante or ex post. That is, neither conditions related to eligibility to receive basic income (age, gender, income level, etc.) nor conditions related to demonstrating specific behavioural compliance or an output (school attendance, number of vaccinations taken, repayment of loans, etc.). In general, most welfare programmes in India are conditional in nature and their continuation is controlled and regulated by a vigilant welfare bureaucracy. Conditions are paternalistic and humiliating, and they challenge the potential recipients to prove that they deserve the support.
By right, we mean that basic income ought to be given to people as a matter of right and not a scheme that can be withdrawn at any time or given as a temporary relief to cope with a calamity.
Theoretically, the efficacy of UBI is discussed assuming it is implemented with all the above characteristics. It is in this combination that UBI gains the potential power:
- To provide a sense of security to individuals and households;
- To raise the floor and provide all the members of the society a ground to stand on – and then build their lives on that foundation navigating through the vagaries of market forces;
- To enable individuals to possess the freedom to say ‘No’ to certain things, and equally to say ‘yes’ to certain other things in their lives.
In India, Self Employed Women’s Association(SEWA) with the support of UNICEF has conducted two experiments in Madhya Pradesh between 2011 and 2013. The first experiment was done in eight regular villages and the second experiment in a tribal village. The experiments strictly adhered to the model described above. The transfers were:
- Universal within the village, which means all the residents of the village – rich and poor- received the basic income;
- The entitlement was individual;
- Cash was either transferred to a bank account or in the case of the tribal village given directly to individuals;
- It was given to them every month;
- It was completely unconditional, and finally,
- It was a right since everyone was entitled to the basic income for the entire duration of the experiment, and even when a child was born during the experiment it was automatically added to the list of recipients.
In regular villages, each adult was paid Rs.200 per month for 12 months which was increased to Rs.300 when the transfers were extended by five more months. In the tribal village, each adult was paid Rs.300 for a period of 12 months. Children were paid half of that amount and money transferred to mothers’ accounts.
The results of the experiment were extremely positive. Food sufficiency improved, small and marginal farmers spent more time on their farms and the result was that more land was brought under cultivation and agricultural production has increased, livestock nearly doubled, women started new enterprises, for smaller borrowings people moved away from the money-lenders to neighbours and relatives, and some people shifted away from more exploitative forms of employment to less exploitative ones. The liquidity that people enjoyed during the experiment empowered them and enabled them to make choices that turned out to be positive and emancipatory.
These positive results, it seems to me, can be primarily attributed to a gestalt effect caused by a convergence of different elements of the experiment rather than because of the simple act of injecting cash into the household. The overall effect of a regular basic income was truly transformative. The emancipatory value, it appears, was several times greater than the monetary value of the transfers both because of the convergence of the design elements and also cumulative effect over time.
The Indian Dilemmas
With 1.3 billion population, the ‘universal’ part of the 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 program Rythu Bandhu is a case in point. This program gave what the government called investment money to farmers twice a year at the time of sowing season. In order to avoid targeting problems the program was made both universal to all farmers and unconditional. All the seven 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 – 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 five percent. The former Chief Economic Advisor, Arvind Subramanian, speculated if we should give basic income to all women, which will ensure that 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 two other elements, Individual and Monthly, we observe that in India but for educational scholarships or old age pensions, the general poverty alleviation grammar in India 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, this objection originates from their 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 food grains, cooking gas, blankets, bicycles, school bags and uniforms, sarees, etc. The global research evidence however points to the contrary. Even the findings of the MP pilot study debunk the myth that the poor will misuse cash. This tendency of our politicians and policy-makers 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 program, 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 scheme, so that it cannot be withdrawn. Secondly, the real value of the basic income needs to be protected against inflation. Which means it needs to be inflation-indexed so that the real value of the money does not get eroded with 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 population are in a state of deprivation because of unequal opportunities; and that they have a 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 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 worst forms of corruption, and results in wastage and leakages of welfare money.
Let me now conclude by emphasizing 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.
An earlier version of this essay was published in two parts in the Indian national newspaper Financial Express”
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