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No small change

Tina Edwin | Updated on January 12, 2018 Published on June 16, 2017
Digest this: Spending on food increases when there is additional income from unconditional cash transfer, studies in India and elsewhere have shown. Photo: Shaju John

Digest this: Spending on food increases when there is additional income from unconditional cash transfer, studies in India and elsewhere have shown. Photo: Shaju John   -  The Hindu

Basic need: Radhabai’s family in Godakhurd village, Madhya Pradesh, received a cash transfer of ₹1,050 every month, which proved life-changing for them. Photo: Sarath Davala

Basic need: Radhabai’s family in Godakhurd village, Madhya Pradesh, received a cash transfer of ₹1,050 every month, which proved life-changing for them. Photo: Sarath Davala

The government demurs on universal basic income, but a pilot done in Madhya Pradesh four years ago continues to positively impact lives

Radhabai has experienced first-hand the transformative effects that basic income can have on the lives of the destitute and the hopelessly poor. Still in her early 30s, Radhabai is a tribal woman from Ghodakhurd village in Madhya Pradesh. She was a child bride at 11 and a mother soon after she entered her teens. The eldest of her three children is now an 18-year-old woman.

Radhabai’s village was selected, along with a few others, for unconditional cash transfer for a pilot carried out by the non-governmental organisation Self Employed Women’s Association of India (SEWA) with Unicef. Every adult in her village was given ₹300 a month and every child ₹150. The money was given to each adult, rather than a common family member, and each child’s money was given to the mother. This ensured there was no domestic strife over how the money was to be spent. Radhabai’s family received ₹1,050 every month during the two-year pilot — a handsome amount for a family that could barely make ends meet and was always in debt. There were no conditions on how the money should be spent, so it was up to individuals and households to make their choices.

At a conference on basic income held end-March in New Delhi, Radhabai explained that her family used the additional income to, among other things, buy a bullock and a few goats. The bullock helped plough a small patch of land they owned and the goats supplemented their income. The additional income also meant her children could attend school regularly instead of going to work, and her husband could work on the farm instead of being a daily wager.

After the pilot ended in 2013, the family was once again hard up to meet its expenses. Radhabai continues to rear goats and work on her family’s patch of land. But her husband and children had to seek work at a brick kiln and papad making unit.

As Radhabai’s experience illustrates, an assured and regular additional income, however small, has the potential to change lives. Pilots conducted in India and elsewhere show that additional income is often used to acquire assets including basic household requirements, besides increasing spend on food. A small amount gets put aside for a rainy day — such as medical emergencies.

Lazy assumptions

The SEWA-Unicef pilot was tested in eight MP villages — in four of these villages a monthly amount was transferred to every household for 12-17 months; in the other four villages there was no income transfer, and these were the ‘control villages’.

The aim was to study the impact of cash transfer on household behaviour. The amount transferred to individuals in non-tribal villages was less than what people in Radhabai’s village received in the first year of the pilot.

This pilot and others elsewhere in the world have demonstrated, surprisingly, that unconditional transfer of cash or basic income does not lead to the poor becoming lazy or giving up working nor increasing spending on liquor, tobacco and other demerit items of consumption.

On the contrary, their spending on demerit consumption declines not just as a proportion of the income but also in absolute terms, says Abhijit V Banerjee, Ford Foundation International Professor of Economics at Massachusetts Institute of Technology and Director of Abdul Latif Jameel Poverty Action Lab (J-PAL) — a network of professors and universities working to reduce poverty by ensuring that policy is informed by scientific evidence. Such change in behaviour has also been established in a World Bank review of 44 estimates from 17 different studies, Banerjee points out.

Guy Standing, a School of Oriental and African Studies (SOAS), University of London, research professor in development studies and a founder member and honorary co-president of the Basic Income Earth Network (BIEN), who is closely associated with SEWA and the cash transfer pilot in MP, reported similar findings in other pilots of this kind.

Standing says basic income impacts in many positive ways — it reduces inequality and inequity and has transformative and welfare effect. Teenaged girls and women with disability, especially, stood to gain more. It is also emancipatory, he says, to an extent that far exceeds its monetary value.

Income and/or welfare

The Economic Survey of 2016-17, authored by the chief economic adviser in the finance ministry Arvind Subramanian and his team, too has favoured unconditional cash transfers to the poor, given the inefficiencies in the plethora of welfare schemes of the Union and State governments and their failure to lift people out of poverty. The survey points out that despite these schemes — 950 Central and Centrally sponsored sub-schemes in 2016-17, which have now been pruned to 675 — States with the largest number of poor were grappling with inadequate funds.

Due to misallocation, the districts that account for 40 per cent of the poor households got about 26 per cent of the resources.

Subramanian argues for replacing some of the ongoing welfare schemes with universal basic income (UBI), rather than running them parallelly. However, his boss, Union finance minister Arun Jaitley recently ruled out the rollout of basic income schemes. Jaitley claims he is supportive of the UBI but it was not politically feasible.

He is right. Withdrawing all or most welfare schemes will spark off opposition from politicians, bureaucrats and the beneficiaries, including the many who are not the intended beneficiaries. Running them parallelly will be very expensive for the country — although some economists have recommended rolling in UBI before withdrawing welfare schemes.

Given the cost involved in implementing a basic income programme, the Economic Survey had suggested quasi-universality. Covering 75 per cent of the population with UBI could cost the economy about 4.9 per cent of the GDP if the basic income is fixed at ₹7,620 per individual.

Banerjee says existing schemes cannot be withdrawn until there is confidence that the basic income schemes would work and cash transfers are shown to be more efficient. “Politically, telling people that you are withdrawing some benefits and giving them something else, it will be a non-starter,” he says. The concept of basic income needs to be proven on ground, and this has not been done, he adds. It could take at least five years of pilots and studies before a conversation on withdrawing existing schemes can take place.

Not all pilots need be conducted in India, says Banerjee, adding that answers to many unknowns need to be found. Among the unknowns are questions such as the duration of basic income transfer needed to make a permanent difference to an individual’s life, whether the transfer should be lump sum or on monthly basis, and the kind of nudges people may need to spend efficiently. Lump sum amounts tend to be spent on accumulating assets while small monthly transfers are spent on food. The poor generally find it difficult to save small sums to spend on expensive items later, as previous studies have shown.

J-PAL hopes to find conclusive answers through a 10-year pilot in Kenya. Standing feels that a shorter, five-year pilot would prove as effective in finding answers without tiring out beneficiaries with the follow-ups on how they spend the money and the impact on their life.

Moving targets

When it comes to designing universal basic income pilots in India, opinions vary on who the target group should be. Suggestions range from women and children only, to the elderly, scheduled tribes and the most backward classes. The SEWA-Unicef pilot covered villages of scheduled tribes and others, but it was the scheduled tribes, being the poorest communities, that benefited the most from income transfers. The trouble with targeting women and elderly is that they form a heterogeneous group, whereas communities of scheduled tribes and most backward classes make for a more homogeneous group as most of them live in similarly deprived conditions and, therefore, it is easier to monitor the impact of income transfers vis-à-vis control groups.

Sarath Davala, coordinator for Indian Network for Basic Income, who was part of SEWA’s basic income project in MP observes that even short-term pilots have a sustainable impact on the beneficiaries. Follow-up reviews show they continue to experience positive effects of the basic income transfers even four years after the conclusion of the programme. For instance, people in Ghodakhurd are more sufficient in food than those in the control villages. Their land is more productive and they have higher incomes than the others, more livestock (both cattle and goats) and display better healthcare behaviour.

Income transfers, even when it is a small amount, can make a perceptible difference to people’s lives, as pilots in MP have demonstrated. The Union government currently feels financially and politically constrained to implement UBI. No doubt it is a difficult decision, but to build consensus, the government should begin supporting multiple pilots around the country.

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Published on June 16, 2017
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