India: Farmers distress political response, explained

India: Farmers distress political response, explained

Indian farmer pouring fertilizer. Picture credit to: The National

As indicated before, there is political movement in India in the direction of basic income. Particularly in the state of Telangana, which started the implementation of its Rythu Bandhu (Farmer Investment Support) program in May 2018. Other Indian states, namely Maharashtra, Rajasthan, Madhya Pradesh, Jharkhand, Odisha, and Chattisgarh, have also introduced farm support initiatives, but Telangana conveyed the novelty of unconditionality. Sarath Davala, Vice Chair of the Basic Income Earth Network (BIEN), and coordinator of the India Network for Basic Income (INBI), has written extensively on this matter, as well as contributed with clarifications and specifications on social media.

In a nutshell, the current Rythu Bandhu program in Telangana, features the following characteristics:

1 – It is universal. All farmers with a land property registration are entitled to 4000 Rupees (50 Euros) per acre per season, making it 8000 Rupees (100 Euros) per annum. Cheques or money transfers were made directly to farmers bank accounts;

2 – It is unconditional: no conditions were prescribed. The farmer needn’t even cultivate. It is left to the farmer what he / she wants to do;

3 – It is called Farmer Investment Incentive Scheme. It was not called welfare, but termed as an investment. This means that, unlike conventional welfare schemes, such as loan waivers or crop insurance scheme, it is not intended as a relief after a calamity has hit, but as an investment.

Telangana has also introduced state-financed life insurance for farmers, over 5,8 million potential beneficiaries, and covering a sum of 500 000 Rupees (6190 Euros). The annual premium, paid by the government, is to be 2000 Rupees (25 Euros). Normally, if anyone wanted life insurance, they would have to visit a particular website to buy a policy, but now, the government is implementing these policies themselves.


Kalvakuntla Chandrashekar Rao. Picture Credit to: Wirally

This first attempt at unconditionality has had its problems, though. The program was criticized for being regressive, since no account was made for redistribution of these benefits to farmers, and so rich farmers were also getting the money from the government. And, since these farmers owned more land, they receive a greater portion of the investment. Another downturn was that tenants, or landless farmers, haven’t benefitted from the program since these do not possess property rights.

To address this last problem, the state of Odisha has announced in December 2018, and will roll out the scheme between February and March this year, pretty much the same as in Telangana but including landless tenants, estimated to cover around 1 million people (and their direct families). Under Odisha’s scheme, there are also available loans (for crop) at zero interest rates. In Jharkhand, Odisha’s neighbour state up North, the farmer assistance plan also disburses a fixed unconditional value per acre of cultivable land, 5000 Rupees (62 Euros) per annum, directed at small farmers (owners of less than 5 acres), for the next 4 years, benefitting over 2 million workers. So, in Jharkhand, rich farmers will be mostly excluded from the scheme. On the border with Bangladesh, in the West Bengal state, the scheme is somewhat more complex. Starting in February 2019, there will be a crop insurance for farmers land, with the state covering its premium. Plus, the same cash transfer as in Odisha will be rolled out, but with spending conditions (on seeds, fertilisers, pesticides, etc.). On top of that, a life insurance similar to Telangana’s, but covering only 200 000 Rupees (2470 Euros). West Bengal state farmer support scheme is directed at an estimated population of 7,2 million small and marginal farmers.

Other states, like Maharashtra, Rajasthan and Madhya Pradesh, have also announced and are implementing policies to help farmers, namely in-kind benefits and loan waivers. But, overall, and according to Sarath Davala, is it a very positive thing to “see a shift from many conditionalities to unconditional”. However, he points out that these policies should not be lightly called “basic income”, as they depart in several ways from definitions of basic income (as, for instance, that of BIEN). Telangana’s policy is neither individual (it is family-based), nor universal (only for farmers, and not even for all of them), nor basic (not enough to cover individual basic needs). However, it does go a step further as far as the unconditional part is concerned.

The State Bank of India (SBI) has also taken an interest in unconditional cash transfers to farmers, although at the expense of the universal basic income (UBI) policy, as presented in a recent report. The SBI confirms that unconditional cash transfers will have a more “meaningful impact” on farmers, than conditional policies applied up to now. However, it advices against UBI, stating that a “cash transfer scheme is always a better option than a UBI scheme. Many countries have found that UBI does not address the structural problems and is at best a solution in interregnum”. It remains unclear, though, how did the SBI found that one policy is superior to the other, in the lack of real UBI implementation around the world. Also, the SBI does not mention which “structural problems” UBI was found not to solve, and in which countries.

More information at:

André Coelho, “India: Telangana, unconditional cash transfer to farmers and more“, Basic Income News, January 21st 2018

Sarath Davala, “Why Narendra Modi May Answer Farmers’ Distress With a Basic Income Plan“, The Wire, January 11th 2018

Anshuman Kumar, “Farmers gain as schemes bring direct benefit to parties“, The Economic Times, January 18th 2019

Unconditional cash transfer to farmer better option: SBI report“, The Economic Times, January 22nd 2019

India: Telangana, unconditional cash transfer to farmers and more

India: Telangana, unconditional cash transfer to farmers and more

Road in rural India. Picture credit to: India TV.

Farmers in India are under considerable stress. Uncertainty regarding weather, yield, prices and revenue, create the perfect conditions for distress and fragility over the exposure to shark lenders. That also means that massive hunger is a risk just around the corner, and in a year of elections in India, its rural population (about 70% of total population) is repeatedly targeted for campaign purposes. Loan waivers, for instance, have been a pet political tool for election purposes, even though waivers haven’t traditionally helped small or marginal farmers (around 80% of all farmers).

To counteract this state of affairs, some states in India start to take matters in their own hands. The province of Telangana has been the first Indian state to provide and unconditional cash transfer to farmers. This, the decision of the Sikkim state to go forward with basic income implementation, experimentations popping up in several parts of the world (e.g.: Germany, Ukraine, United States, Spain), and some political support for basic income over central government in New Dehli, particularly after the 2016-2017 economic survey and its famous chapter on basic income, leads to renewed conversations in India.

In programs like this one, provocatively titled as “Government mulls universal basic income, is India ready for income for all?”, obstacles to basic income seem more in number and in size, than opportunities and benefits it can potentially provide. TV pundits take turns at criticizing the idea: it disincentivizes work, it is unaffordable, it is vague and populist, it cannot possibly be a replacement for long-time and traditional forms of help to those in need. However, simultaneously, some high placed economists and politicians see at least some advantages and viability in a basic income for all Indians, or directed to certain population cohorts (such as farmers). The dice are rolling.

Sarath Davala. Picture credit to: BIEN

Sarath Davala. Picture credit to: BIEN

Sarath Davala, coordinator at India Network for Basic Income (INBI), has written on Facebook: “Increasingly I am beginning to think that India could be the first country to take the plunge into a kind of Targeted Basic Income. It won’t be universal, but it will certainly be unconditional. The initiative is more likely to come from the provinces”. Guy Standing, also a long-time activist and researcher on basic income and someone who has been deeply involved in the Indian (basic income) experiments, has also pronounced himself at the onset of India’s first steps towards this revolutionary policy: “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. Will the politicians show the will to implement it? We need to see”.

More information at:

Why Telangana gave cheques to farmers instead of direct transfer”, rediff Business, May 11th 2018

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

Guy Standing, “Basic income works and works well”, The Hindu, January 14th 2019

India: Sikkim state is on the verge of becoming the first place on Earth implementing a basic income

India: Sikkim state is on the verge of becoming the first place on Earth implementing a basic income

Flowers, on the way to the mountain. Picture credit to: Rookie’s Journal

Sikkim, the second smallest state in India, has grown a reputation, over the years, for environmental consciousness, ethnical diversity and tourism. It is also the home of one of the most educated people on Earth, with a 98% literacy rate. Moreover, in the last couple of decades, policies in the state have been implemented in order to reduce poverty, which presently sits below 8% (from a 41,4% in 1994). The Sikkim Democratic Front (SDF), the democratically elected party governing the state since 1994, has written basic income into its manifesto for the 2019 Assembly elections, and aims to have it implemented by 2022.

SDF’s MP in New Dehli’s Lower House of Representatives (Lok Sabha), Prem Das Rai, has said that “our party and Chief Minister Pawan Chamling (…) are committed to bringing in Universal Basic Income. This, we will do three years of coming back to power in the state”. This initiative is not intended as a pilot test, but as an actual implementation, hence Prem Das Rai words: “Basically, it’s an income given to families irrespective what do they do. In Sikkim, it will be for everyone and every household.”

As for financing the basic income scheme, SDF officials are considering surplus energy generation revenue (from hydropower) and redirecting costs from welfare programs which cease to be relevant. Restructuring the tax edifice and using tourism revenues are also future financing routes to cover for basic income. In any case, Prem Das Rai is confident that this is “not just a feasible idea, but a very positive idea”.

About this issue, basic income activist Scott Santens has written, on Twitter: “What makes this news so big in my opinion is the fact they’re talking about full universality, unlike what’s being discussed at the national level right now, where cash may be targeted to the poorest 33% of the country and thus not actual UBI. This news out of Sikkim is actual UBI.”

More information at:

Liz Mathew, “Sikkim says it will become first state to roll out Universal Basic Income”, The India Express, January 10th 2019

André Coelho, “India: 2019 General Elections and basic income”, Basic Income News, January 9th 2019

India: 2019 General Elections and basic income

India: 2019 General Elections and basic income

Indian woman worker with spectacles. Picture credit to: Sarah Day

 

New ideas seem to be running dry in the Indian political context. Within Congress, Government (BJP – Bharatiya Janata Party) and opposition parties (ex.: AAP – Aam Aadmi Party). Tweaking with the minimum support prices for food production and/or with the multiplicity of welfare programs is not going to substantially change rural population’s main concern, which is declining real wages (purchasing power after adjustment for price variations). These have been steadily falling since 2014, ever since the BJP came to power, which means that to stay too focused on the former issues will not probably get BJP reelected this year. Also farm loan waivers (credit write off) has been used as a political tool, especially by the opposition (mostly center and left-wing) parties, given the high indebtedness rates of rural families (over 50%) and their dependency on predatory lenders (also over 50%).

 

However, according to political analyst Saubhik Chakrabarti, from The Economic Times, loan waiver is not going to be decisive for these next elections, even though it has been flagged by the opposition in regional suffrage (which has won three states from BJP). This decisiveness might very well come from pushing the basic income policy, an old new idea that has been hot in India ever since the 2016-2017 Economic Survey Report featured a whole chapter to it. And this applies to both parties / coalitions with a shot at forming a government in 2019, because what really impacts real wages is not topping crop prices or forever trying to fix a broken welfare distribution system (very complex and prone to corruption). A real difference may come from directly and unconditionally giving people what they need the most, economically: money.

 

Even though there will be no time to properly design, let alone implement a basic income scheme regionally – and even less likely a national implementation – before this year’s elections (latest in May), Chakrabarti suggests that one or more pilot tests could be tried out. According to him, that could be done “in chosen districts, accompanied by a blaze of political publicity, [being] enough to take to voters, with the promise that re-election will lead to an across-India UBI program.”

 

More information at:

Saubhik Chakrabarti, “Doling out a universal basic income scheme may be Narendra Modi’s best chance to win 2019 mandate”, The Economic Times, 24th December 2018

Farm loan waiver: How to nip it in the bud”, The Economic Times, 7th January 2019

Kate McFarland, “India: Government Economic Survey presents case for basic income”, Basic Income News, February 4th 2017

Farmers’ Distress, Electoral Democracy and Basic Income Discussion in India

Farmers’ Distress, Electoral Democracy and Basic Income Discussion in India

Written by: Sarath Davala [1]

In the last two weeks, there has been much speculation in some sections of media about Prime Minister Narendra Modi seriously considering Universal Basic Income (UBI) as a policy option. This comes on the heels of the electoral debacle Modi’s party faced in the recent elections in four states, and coincidentally just months ahead of the 2019 parliamentary elections.

This is the second wave of interest the current government has shown toward the idea of Universal Basic Income (UBI). The first wave was in early 2017 when the then Chief Economic Advisor to the Government of India, Dr. Arvind Subramanian, included a substantial chapter [2] on UBI in his annual Economic Survey (2016-17) which was presented to the Indian Parliament. The chapter explored the concept of UBI and observed that it could be a way forward to address poverty. Subramanian stated that a full-fledged UBI may not be feasible in India immediately, though it was possible to think of a Quasi UBI (QUBI) which would identify specific demographic groups in the population and give them an unconditional basic income. One of his speculations was that a QUBI could be to all women citizens, which would ensure that every household will receive a basic income. The discussion within the government did not proceed beyond this point, apparently as the Prime Minister was not convinced at that time of the political dividends flowing from this policy route.

The immediate trigger for the second wave of interest in basic income is the recent elections in the states of Telangana, Rajasthan, Madhya Pradesh and Chhattisgarh. At the time of these elections, the financial crisis affecting farmers became center-stage and the Congress party promised that they would waive farm loans as soon as they came to power. And they did so when they took charge of three states.

In the state of Telangana, the ruling party TRS went a step further by implementing several months before the elections a scheme called Rythu Bandhu, (Farmer Investment Support) which gives to the farmers Rs. 8000 (USD $115)[3] per acre per annum[4]. The cutting edge of the scheme is that it is unconditional, a feature that is considered central to the idea of basic income. Irrespective of whether farmers take up cultivation or not, the investment will be transferred to the farmers. The scheme benefited about 5.8 million farmers who own a total of 14 million acres of cultivable land in Telangana.

In 2017, responding to farmers’ agitation in the state, the Madhya Pradesh government implemented a different kind of scheme for farmers. It was called Bhavantar Bhugtan Yojana (BBY) which originally intended to pay farmers the net difference between the actual sale price and the Minimum Support Price announced by the government. Subsequently, however, the government introduced the notion of a modal rate which is the average of the sale price of a given crop sold in Madhya Pradesh on any given day, and in markets of two other neighboring states.

Both the schemes ran into controversy, particularly the latter. Regarding the Rythu Bandhu scheme, the criticism was that the scheme does not give any benefit to the tenant farmers who actually cultivate the land. Secondly, the scheme was criticized as regressive since it was paying rich farmers as well. The government then appointed J-PAL, a reputed international group based in the Massachusetts Institute of Technology in the United States to monitor and evaluate the scheme. In the initial survey conducted by it after the first round of transfers were made in June 2018 revealed that most cheques were for less than Rs.20,000 (USD $287), and only 0.8% of the farmers received more than Rs.50,000 (USD $718). A follow-up survey by J-PAL revealed that farmers spent the money judiciously with over 77% purchasing crop inputs, and 92% percent saying that they were satisfied with the scheme.

The Madhya Pradesh scheme was criticized because it brought in the notion of a modal rate which was far above the actual sale price. Ordinary farmers, who were unaware of the critical distinction between the actual sale price and the modal price, were in for a shock. Assuming the government would compensate them the difference between MSP and Sale Price, many of them also made distress sale of their produce and then realized that they would get much less compensation. Disappointed with this conditionality, many farmers were unwilling to sign up for the subsequent crop.  This was not the only conditional aspect of this policy. The sale must take place during a prescribed window of three months. There was a cap on the volume that a farmer can get compensated per hectare. There was also a proposal that if a farmer sells his produce for less than 50% of the MSP, he becomes ineligible since it is the poor quality of his produce that is the reason for the low sale price, and that government should not compensate the farmer for producing low quality produce. And lastly, the scheme was applicable to only seven specific crops.

It appears that these two schemes and the farm loan waivers are the three primary options that the central government is discussing in order to find an effective response to the distress farmers all over the country are experiencing. Let us consider each one of them.

First, the loan waivers. All the three new Congress governments have announced loan waivers within days after assuming power. Even as these announcements have been taking place, experts from different locations have criticized loan waivers as harmful to the economy. Following these announcements by the new Congress governments, the former RBI Governor Dr. Raghuram Rajan released a document entitled An Economic Strategy for India which he co-authored with 12 other well-known economists including the IMF Chief Economist Gita Gopinath and Sajjid Chinoy of JP Morgan, among others. The report advises the government to “… eschew loan waivers that divert resources from needed investment.” Arvind Subramanian in a recent interview severely criticized farm loan waivers as “an inefficient, retrograde and even perverse method of addressing farmers’ distress”.  He further added that nearly 50% of the small and marginal farmers cannot and do not borrow from formal banks and they are completely left out of this mode of addressing farmers’ issues. Dr. Urjit Patel who had recently resigned as the RBI governor criticized farm loan waivers as corrupting the credit culture in the country.  Addressing his party workers in Karnataka, PM Modi himself called Karnataka government’s farm loan waivers as a “cruel joke on farmers”, and that it benefits only a handful of farmers.

It is clear the farm loan waiver is not likely to be part of PM Modi’s new grand electoral narrative. This now brings us to the other two options. Between the two, the Rythu Bandhu seems to be a clear winner not just because of the electoral gains that the TRS party reaped from its introduction. It is because of certain essential features it has that are unique and demonstrate a clear transformation in the very grammar of welfare policymaking in India.

Firstly, it is an entitlement without having numerous conditionalities. The only conditionality is that the recipient must have a clear title. The curse of various welfare schemes in India is that each one comes with innumerable conditionalities thereby giving extraordinary discretion to inspectors who administer it. Rythu Bandhu makes a departure from this welfare practice. This is based on the assumption that any support given by the government must be given only to the deserving and that we need to ensure that it is spent only for the purpose it is given. Who deserves and who does not is decided by the government. And so is the purpose. Secondly, Rythu Bandhu is a proactive policy and not relief after the calamity has occurred. In fact, some economists such as Ashok Gulati, Arvind Subramanian, Bimal Jalan, etc., have said that it could be a potential agricultural policy for the entire country. The main point is that it is defined as an investment rather than welfare. Thirdly, because it is unconditional and a cash transfer, it is very easy to deliver. The record of delivery of Rythu Bandhu has been very impressive. Except in those cases where the land ownership is in dispute, the majority of farmers in the state have received cash in their bank accounts.

In addition to these innovative features, the TRS government has also added an additional scheme to all farmers called Rythu Bima, a life insurance scheme which provides coverage of Rs. 500,000 (USD $7,179). The annual premium of Rs.2272 (USD $33) per farmer is to be paid entirely by the state government.

This is this grand electoral moment that PM Modi is facing. What is he likely to do? Given that farmers have become quite vocal and that there is hardly any time before the Model Code of Conduct would come into operation around March 2019, he must respond in some form in the interim budget. Most likely, he will implement some version of Rythu Bandhu in combination with an insurance scheme for farmers. While this cannot be called a true UBI, it does carry the spirit of the idea of basic income because of its unconditionality. Normally we would be inclined to dismiss this is an electoral gimmick. We should not forget that in an electoral democracy, change comes in a clumsy way. We must be clear when we are positively moving forward and when we are not. In this case, the Indian political parties are embracing the spirit of basic income. This shift in India’s policy grammar should be seen as a welcome move in our journey to build a better society.

 

[1] Sarath Davala is the Vice-Chair of BIEN and Coordinator of India Network for Basic Income (INBI).

[2] Universal basic Income: A Conversation with and within the Mahatma

[3] To make sense of these amounts, it is useful to know that the rural poverty line in India is defined on the basic of per capita expenditure, which is half a dollar a day.

[4] This amount will be disbursed twice in a year, one just before Rabi crop season and one before the Kharif crop season.