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Minimum basic income is fine. But these basic questions need answers first

Amitabh Pandey | Updated on: 11 February 2017, 5:45 IST

Politicians need votes to get elected and, once in power, select policies based on political expedience and ideology. Thus policy making, vote getting and ideological considerations are inextricably intertwined. Nonetheless, it is essential to try to assess major policy options on the basis of logic and, if possible, data.

The idea of a 'basic income scheme' has surfaced in pronouncements by senior policy makers recently and, surprisingly enough, dissenting voices within the establishment have also been publicly heard.

A scheme of this nature, if adopted, would be a major step in the economic life of modern India. The fundamentals underpinning such a policy deserve a close, dispassionate look and extensive public debate.

Who gets the dole

If distribution of a 'basic income' is to be undertaken by the state as a permanent 'welfare' measure, the first questions relate to defining this minimum and deciding who would be the recipients.

Traditionally, the poor in India are defined as those who do not have enough entitlements to enable them to consume a certain minimum number of calories. Converted into money terms, this could be considered a 'basic minimum'.

Despite the debate on the percentage of population below the 'poverty line', such a 'basic minimum' can perhaps be arrived at without too much squabbling - enough work on the subject exists.

The more contentious issue however, is to define the recipients of this largess. One obvious answer is that only those below the 'poverty line' should receive this 'basic' income.

Unfortunately, the surveys on which poverty percentages are estimated are not comprehensive listings of every Indian and her calorific consumption - we do not have a list of 1.2-odd billion people classified as poor or not poor.

What is poverty

So how on earth would anyone know who merits receipt of a basic minimum income and who doesn't? The issue appears insoluble in any practical way in any reasonable time frame.

Besides, research has shown that poverty is not a 'static' phenomenon. Even if an accurate list of the poor at a particular point of time could be magically constructed, it would not be a static one.

People 'fall into' poverty and people 'climb out' of poverty for different reasons at different times; poverty is 'dynamic'. Which state institution of modern India could be trusted to create and maintain such a 'dynamic' list with any degree of reliability?

A brief consideration of institutional capability is essential here. The Indian state, over more than six decades, has demonstrated its comprehensive incompetence in implementing policy at the grass roots.

How do we guard against corruption

Grand schemes are not new and neither is wholesale corruption and incompetence that have reduced such schemes to mere instruments for the enrichment of the local political and bureaucratic elite and their partners and henchmen.

If the poor are to be identified and certified, rent seeking by those responsible is inevitable. In the jargon of the economists errors of 'inclusion' and 'exclusion' are bound to be very, very significant, to say the least. And the list has to be continuously kept up to date - more rent.

The requirement is an impossible one.

An obvious solution - one suggested by many scholars and for which a 'pilot' experiment and detailed data therefrom is available - is a universal scheme. Every citizen - the problem of distinguishing citizens from non-citizen residents being ignored - should be eligible for a basic minimum income.

This solves the immense problems of selection and eliminates the possibilities of inbuilt corruption in the implementation of the scheme. It enormously magnifies, however, the problem of resources needed to provide a billion-strong population with a basic income.

Scholars have argued that the money can be found if the huge subsidies currently given to food, fertilizer and petroleum be eliminated and other wasteful expenditures curbed. This, however, is easier said than done. The vested interests - the perceived vote banks - are powerful and not easy to brush aside.

Which technology can work

Following from this is the critical issue of implementation, assuming the resources can be found. Here the magic wand is said to be technology. Aadhar cards issued to all citizens and each linked to a bank account is the suggested solution and theoretically it sounds good.

The unstated assumption is that the Aadhar system ensures no duplication and is robust enough to support an application that enables money transfer to each card holder on a regular basis from designated state accounts.

The system has also somehow to be regularly updated with data about card-holder deaths. This is in itself a huge task and requires a nationwide monitoring system that does not, at present, exist.

Besides, ensuring that each citizen has an Aadhar card and a linked bank account is still a work in progress. It needs to be completed and validated before it becomes an instrument of development and social transformation.

Unlike most grand ideas, this one has been validated by a pilot study: "about 6,000 men women and children in nine villages in Madhya Pradesh received a basic income, most paid every month, for about a year and a half". The impact was monitored and studied in detail by professional economists in the field.

The study concluded that "a modest basic income paid monthly in cash individually and without conditions" would have a "transformational" impact by "raising productivity, incomes and work and labour", "raising the quality and quantity of work in an inclusive, sustainable and relatively equitable manner" and "enhancing personal freedom, particularly for women... those with disabilities and the elderly."

(Refer to Basic Income - A transformative policy for India by Standing, Davala, Jhabvala, Mehta)

For a country the size of India with all its diversities, the sample is rather small. Perhaps similar studies need to be conducted in different areas to evaluate not just the positives but also the possible negatives before a nationwide policy is adopted.

Here again the problem of credibility arises. It is difficult to replicate such studies reliably, especially if it is the sarkar that is responsible for doing so.

Be that as it may, here we have at least one detailed, credible, professional study yielding fairly categorical conclusions. Policies, as we have all seen and suffered, have been adopted on far flimsier grounds than a professional, if small, sample study.

The Devil however, lies, as always, in the implementation. The preparation needed for effectively implementing a basic income policy will be a painful, long and detailed exercise of setting up systems that accurately and continually collect the detailed data necessary to ensure comprehensive and honest implementation.

The banking system has to be the lead player - and the system has not exactly covered itself with glory in recent months. In the context of a 'basic income scheme', a stress on impatient populism rather than careful preparation will, in all likelihood, be a recipe for disaster.

Also refer to India's Long Road by Vijay Joshi

Edited by Joyjeet Das

First published: 26 January 2017, 11:04 IST
 
Amitabh Pandey @catchnews

An alumnus of St Stephens Collegeand the Delhi School of Economics, Amitabh taught Economics for threeyears , was a civil servant for twenty four and then moved to theprivate sector. He now pursues other interests viz: reading andwriting.