Can basic income ensure distributive justice in India?

Can basic income ensure distributive justice in India?

Universal Basic Income (UBI) is once again in the news as a promising program in the upcoming general election in India after finding its place in India’s 2016-17 economic survey. Proponents say UBI is economically prudent and could make a significant dent on poverty in the country. UBI bypasses India’s weak system of existing welfare schemes which are riddled with misallocation, leakages, and exclusion of the poor. It also makes sense from the perspective of an individual, who is assumed to be economically rational and thus can spend in accordance to his priorities and choices.

Having said there is insufficient empirical evidence to demonstrate how UBI could accomplish social justice and poverty reduction, especially in a country like India which is still held down by a regressive social structure in the form of a caste system. The caste system leads to a lack of mobility, producing a semi-feudal system of land ownership. Land is held by a small fraction of the population with the rest being landless or having little property, especially in rural areas. The fact that most of the poor are also concentrated in India’s rural areas makes the case that UBI could be successful at alleviating poverty.

Moreover, the proposition that UBI will reduce poverty assumes that the market works competitively and allocates resources efficiently. However, markets do fail in providing an efficient and just outcome in the presence of informational asymmetry, externalities, and monopolies. This is especially true in the case of India where the market is disproportionately in the hands of a few big players who can influence it to their advantage. For instance, giving out cash as opposed to goods and services in kind may not help in remote places if the corresponding supply of essential goods are not there (this role is otherwise performed by the public distribution system in India which may be dismantled to make fiscal space for UBI). A monopoly supplier may hike the prices to neutralise the extra income. To the extent the purchasing power of cash transfers in the form of UBI is curtailed by market fluctuations, the efficacy of basic income to alleviate poverty could be limited.

UBI even in the presence of efficient market can capture only poverty in terms of economic deprivation, whereas factors such as poor health, lack of education, discrimination and lack of entitlements cannot be addressed by the market but are crucial from the perspective of eradicating poverty.

John Rawls in his seminal work propounding the concept of distributive justice is guided by the ‘difference principle,’ which stresses that goods and services should be arranged in a manner that serves to benefit the least advantaged and foster growth towards equality of opportunity.  To the extent that everyone will receive the same amount of cash transfer irrespective of his or her requirement, the UBI fails to ensure distributional justice, in accordance with the ‘difference principle’. In this case, justice would require maximizing assistance to those who need it most, which at present our welfare schemes (despite its weaknesses) strives to achieve. UBI at best can only work in conjunction with the existing policies. In order to fully eradicate poverty, the welfare state should work towards increasing its capacity to deliver and regulate rather than leaving it to the market.

 

Rishi Kant

Currently pursuing Master’s in public administration (MPA), LKY school, National University of Singapore. Graduated in Economics from Delhi University and Post Graduated in Economics from Jawaharlal Nehru University. 5year experience of teaching in various colleges of Delhi University and working with the government of India under various capacities. He has worked as a researcher in the field of Labour economics and evaluated major labour market policies in India such as the Mahatma Gandhi National Employment Program. He has also part of capacity development programs organised by IMF in the areas of Macro-Economics, Fiscal and monetary policies, and Financial Programming and policies.

References

 

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Khera. R (2016) ‘A Phased Approach Will Make a Basic Income Affordable for India’, The Wire.

Michel. H (2008), ‘Global Basic Income and its Contribution to Human Development and Fair Terms of Global Economic Co-Operation: A Political-Economic Outlook’, A Paper for the Congress of the Basic Income Earth Network, University College, Dublin, Ireland.

Pettit. P (2007), ‘Basic Income and the Republican Legacy’, Basic income studies, International Journal of Basic Income Research Vol. 2.

Porter. E (2016), ‘A Universal Basic Income Is a Poor Tool to Fight Poverty’, New York Times.

Standing. G (2002), ‘Beyond the New Paternalism: Basic Security as Equality’, London.

Standing. G (2015), ‘India’s experiment in basic income grants’, Global Dialogues, Vol. 5.

Taylor. T (2014), ‘Economics and Morality’, Finance & development, a quarterly publication of the international monetary fund, Volume 51.

Todaro, Smith (2015), ‘Introducing Economic Development: A Global Perspective’ Economic Development, 12th edition, chapter 1, Pg 20.

Tobin. J, et al (1967), ‘Is a negative income tax practical’? The Yale Law Journal.

Van. P (1995), ‘Real Freedom for All’, Oxford, Oxford University Press.

https://www.ft.com/content/100137b4-0cdf-11e8-bacb-2958fde95e5e

https://www.weforum.org/agenda/2017/03/can-universal-basic-income-actually-work

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India: Prem Das Rai: “Lazy people will be lazy people whether they get money or not”

India: Prem Das Rai: “Lazy people will be lazy people whether they get money or not”

Prem Das Rai (Wikipedia)

 

The Morung Express newspaper has interviewed the sole Sikkim MP at Lok Sabha (central parliament in India), Prem Das Rai. On the 17th of February, excerpts of that interview were posted, where Rai clearly states that introducing a universal basic income (UBI) in the state “is a leap of faith”. To him, it is a trust issue, when critics point out that a UBI kind of policy may turn people lazy. In reply, he says that “lazy people will be lazy people whether they get money or not”.

 

Rai does not conceive UBI as a grant, or a subsidy, but an income. That means that the purpose is not to have UBI seen as a hand-out, but a human right. “UBI is for every citizen of Sikkim, all Sikkimese people”. This contrasts with the recent announcements of both national opposition party Congress and government Bharatiya Janata Party (BJP), which Rai considers to be targeted schemes (Congress aims at the “poor” and the BJP at “poor farmers”) and in reaction to the agrarian crisis ravaging the country.

 

According to Rai, Sikkim state is not proposing basic income as a reaction to some urgent crisis, but as a way to look “ahead and changing the mindset of the youth”. Over that new mindset, and knowing they will have a guaranteed influx of money every month, regardless of their personal situation, people will naturally behave differently and tend to make better choices in life. That is Rai’s belief, anyway.

 

As for funding, and instead of speaking about taxes, Rai responds that Sikkim state is rich in resources, such as “hydropower, tourism, organic farming and pharmaceutical companies”, as well as “educational facilities”, and so will find the funds to cover for basic income, from within these several sources. The specific form this funding will be performed, however, is still unclear.

 

On Raul Ghandi’s Congress party promise to implement a kind of basic income all across India (conceived as a negative income tax), if it gets elected in May, Rai responds that Sikkim is the example to follow, devaluing Ghandi’s initiave. Rai sees basic income in India more as a growing number of regional initiatives, rather than a central idea, implemented nationally.

 

 

More information at:

André Coelho, “India: Sikkim state is on the verge of becoming the first place on Earth implementing a basic income”, Basic Income News, January 11th 2019

Universal basic income proposal a leap of faith: Sikkim MP”, Morung Express, February 17th 2019

André Coelho, “India: Basic income is being promised to all poor people in India”, Basic Income News, February 1st 2019

India: Congress party gets serious about basic income and reaches out to Thomas Piketty for policy design support

India: Congress party gets serious about basic income and reaches out to Thomas Piketty for policy design support

Thomas Piketty. Picture credit to: Books Live (Sunday Times)

Details are being fed into Rahul Gandhi’s promise of a minimum income guarantee to poor Indians, an announcement made earlier this month. Thomas Piketty, an authority in economics, and particularly in inequality analysis, is assisting Ghandi’s Congress party in designing the policy onto the Indian context.

Although Piketty has a particular vision on basic income, he has supported a universal, unconditional basic income. At some point the particulars of his proposal may have generated confusion, but it seems his contribution to what can be a real shot at implementing (a kind of) basic income in India prove his resolve on this matter. “It is high time to move from the politics of caste conflict to the politics of income and wealth distribution”, Piketty has stated. MIT professor Abhijit Baerjee is also helping to materialize this idea on the Congress manifesto for the upcoming elections. Economy Nobel prize winner Angus Deaton was also contacted by party officials, but hasn’t apparently been involved in the scheme’s design.

The Congress’s proposal for its “minimum income guarantee” was told, by party officials, to be “anything above 10000 Rupees per month” per household. For a typical family, that would amount to 66% of the family’s net living wage, which contrasts with the Bharatiya Janata Party (BJP) most recent promise for implementation of a basic income-type of policy (6000 Rupees/year, per small farmer).

More information at:

André Coelho, “India: Basic income is being promised to all poor people in India”, Basic Income News, February 1st 2019

Expenditure and Living Wage calculation in India

Scroll staff, “Minimum income guarantee: Economist Thomas Piketty confirms he is helping Congress with the scheme”, Scroll.in, February 7th 2019

Thomas Piketty, “Is our basic income really universal”, Le blog de Thomas Piketty, February 13th 2017

Genvieve Shanahan, “FRANCE: Piketty’s comments on basic income cause confusion”, Basic Income News, February 3rd 2017

D.K. Singh, “Thomas Piketty & Angus Deaton help frame Rahul Gandhi’s minimum income promise”, The Print, January 31st 2019

André Coelho, “India: The Indian government also promises basic income to farmers”, Basic Income News, February 12th 2019

India: The Indian government also promises basic income to farmers

India: The Indian government also promises basic income to farmers

Masked Narodi supporters, in 2014. Picture credit to: Aljazeera

Just a few days after Rahul Gandhi, leader of the Congress Party, announced the intention of implementing a “nationwide minimum income for the poor”, Prime Minister Narenda Modi’s government now proposes a “basic income for poor farmers”. This policy was set as a part of a supposedly interim budget, only up to the elections date (May 2019), although in this case expenditure was scheduled up to December 1st 2019, in a clear bet to win these elections and continue in power.

The cited interim budget was presented by (acting) finance minister Piyush Goyal, and the “basic income for poor farmers” is expected to affect millions of small farmers, who will be paid 6000 Rupees per year (84 US$/year), in principle as an unconditional cash transfer. 6000 Rupees averages around 3% of a typical family yearly net living wage (~183000 Rupees), and 6% that of a single adult (96900 Rupees). It is inferred that the hand-out to farmers would be to the farmer, as the owner of the land parcel, hence to his/her family. In this context, the policy promise is not individual (only if the farmer is single and has no dependent children), nor enough to cover minimum necessities (not basic), nor universal (only for farmers). The “basic income” term, therefore, is used by Modi’s government in a very loose manner, which might indicate more of an intent to get an electoral edge, particularly over the latest Congress proposal.

There is a general acceptance in India that transferring money directly to poor people avoids the corruption of the current subsidies system, and so such a policy as a kind of basic income makes sense to many. Unemployment is another important issue, but, interestingly enough, this might be ameliorated by the implementation of a basic income (type of policy), according to Gareth Price, from the Chatham House think tank. This is because direct, unconditional money in the pockets of people will most likely drive an economic expansion. Despite this reasoning, in other allegedly developed nations, such as France, the ability to work in paid jobs is still seen as central to the social contract. There, policy makers are more afraid people will just sit back and give up on contributing with their work to society, than they are confident that basic income will help those at the bottom of the income scale to fully participate in the economy, as workers and consumers.

More information at:

André Coelho, “India: Basic income is being promised to all poor people in India”, Basic Income News, February 1st 2019

Adam Withnall, “India budget: Modi announces universal basic income for farmers in bid for rural vote ahead of elections”, Independent, February 1st 2019

Expenditure and Living Wage calculation in India

André Coelho, “France: Law proposal to experiment with basic income rejected before even discussed”, Basic Income News, February 10th 2019

India: A Minimum Income Guarantee is being promised to the poorest 20% of the population in India

India: A Minimum Income Guarantee is being promised to the poorest 20% of the population in India

Rahul Gandhi. Picture credit to: The Wire

The main opposition party in India, the Congress party, has just promised to implement a “nationwide minimum income for the poor”, rolling out the unprecedent scheme starting as soon as May 2019, if it gets elected. The party’s president Rahul Gandhi, has announced this on Monday, while speaking to farmers in Chhattisgarh state, where Congress was elected after promising statewide loan waivers.

Critics from the Bharatiya Janata Party (BJP), currently in power, dismiss this minimum income for the poor as a false promise from Congress, taken in a populist fever given the upcoming general elections, but Congress leaders have replied with the fact that they are fulfilling their promises on farm loan waivers in the states where they have been elected to recently. According to them, namely though BJP leader Ravi Schankar, this is just one more announcement, among many others which never saw the light of day. As Shankar speaks, though, regional leaders are fulfilling some of the Congress party regional electoral promises. Ashok Gehlot, just recently elected as chief minister of the Rajasthan region, India’s largest state located on the East side shouldered by Pakistan, just said on Monday that “whatever promises [Rahul Gandhi] made during assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarth, we are fulfilling them, be it farm loan waiver or allowance to unemployed youths.”

Rahul Gandhi has firmly stated: “Nobody will remain hungry and nobody will remain poor as all poor people will be entitled to a guaranteed income. We will do this in Chhattisgarh, Madhya Pradesh, Rajasthan and all other states as well. All you have to do is to give us an opportunity”. Particulars have not yet been revealed (for instance, what are the parameters defining “poor” in India), but this announcement from Congress comes on the wake of the 2016-2017 Economic Survey, which suggested the implementation of a basic income to support the bottom 75% of the population in terms of income. In that document, the scheme’s realization would include the rollback of several (conditional) subsidies.

Running up these last months to the general election, spirits are agitated. There has been speculation on whether Narenda Modi and his government would attempt to implement a nationwide basic income on this week’s presentation of the interim budget, as a response to farmers protests all over the country. That led some to think that Ghandi’s move was meant as a strike to turn the table and get Congress one step ahead facing the impending elections. Could be. However, government officials are sceptical about how to finance such a bold policy, without cutting on State essential services and unleashing “runaway inflation”, which discourages the belief that government will make history in only three months.

As expected, the Congress party leadership was quick to support Gandhi’s announcement, with messages and statements from Chidambaram, Sheila Dikshit and Bhalchandra Mungekar, all Congress heavyweights (Chidambaram occupied ministerial positions for ten years, from 2004 and 2014, and Sheila was the longest serving Chief Minister of Delhi). Chidambaram as stated that “the poor in India have the first charge on the resources of the country and the party will find the resources to implement the promise of Rahul Gandhi.” He has been nominated the Congress Manifesto chairman for the 2019 elections, steady on the belief that “now we should make a determined effort to wipe out poverty in India”.

Chidambaram. Picture Credit to: The News Minute

Whoever gets to implement basic income in India, the proposal as it stands seems to be framed as a Negative Income Tax (NIT), since it is being direct to the poor. Arguably, the financing mechanism will expectedly use taxes and savings on welfare schemes to make direct cash transfers to those who fall below a certain poverty threshold. The next few months will be critical to Indian politics, and probably to the world’s social landscape. Right now, all eyes are on India. Sarath Davala, a long-standing basic income activist in India and internationally, has stated on Facebook:

“Indian National Congress, the main opposition party now announces Basic Income to the poor. Details are yet to be worked out. I cannot ask for more. Ironically though, our real challenge begins NOW – translating the idea plus evidence into concrete national policy without diluting the spirit of basic income.”

More information at:

Cherrupreet Kaur, “Rahul Gandhi’s mega poll promise: Minimum income for poor”, The Times of India, January 30th 2019

Rahul’s announcement of guaranteed minimum income ‘historic’: Chidambaram”, The Times of India, January 30th 2019

Rahul’s minimum income guarantee promise not meant to be implemented: BJP”, The Times of India, January 30th 2019

After Rahul, Sheila too promises ‘minimum income’”, The Times of India, January 30th 2019