“Basic income should have maximum inclusion”

Interview: Renana Jhabvala, SEWA Bharat

Neelam Gupta | February 2, 2017


#Sewa Bharat   #Renana Jhabvala   #Economy   #Budget 2017   #Demonetisation   #Economic Survey   #Narendra Modi   #UBI   #Universal Basic Income  


SEWA Bharat had initiated a unique pilot project on cash-for-food (that is, cash replacing PDS goods) in Delhi some time ago. However, the basic income pilot project in Madhya Pradesh goes a step beyond that, giving cash to people without any conditions. What was the genesis of this project, what prompted SEWA Bharat to take it up? 

For many years SEWA has been working on social security for the poor. For this, we have worked with governments at the centre and the states to frame the right policies. A number of social security schemes have been introduced but nothing has made the poor’s life easier. Reasons? One, barriers, and two, corruption. In every scheme to help the poor – PDS for food security, the beneficiary card for health or education, or loans for agriculture – there is a lot of paper work: yeh lao, vo lao, yeh proof, voh proof; a number of implementing agencies are involved and at every step, the beneficiary has to pay bribes. So, in spite of a plethora of welfare schemes, delivery is very little. In 2009, when talk of cash transfer was in air and there were so many arguments for and against it, SEWA took it as an opportunity and decided to carry out an experiment on the ground. To us it was an easy and clean way to help the poor. Cash transfer would be direct from the centre to the beneficiaries’ accounts. There would be no middlemen seeking bribes and people would also have the choice to buy goods and services as per their requirements – unlike the existing schemes, in which they don’t.

READ: Free money? Seriously?

But transferring cash to the accounts of the poor in villages was not easy. Three things were required: The bank account, the machinery or technology to transfer the cash, and a nearby market to put the amount to use. SEWA discussed these issues internally and also with some other agencies. In those days, there were a lot of arguments made in media debates, that cash transfers can induce dependency and laziness, money would be wasted on vices like alcohol, or that it would improve the quality of life for the poor. All of this was based on macro data; there was nothing based on micro data. So SEWA approached Unicef and we started a pilot project in some rural areas of Madhya Pradesh. Instead of ‘unconditional cash transfer’, we called it ‘basic income’. 

The project covered all people of all classes, also children. What was the justification for making it really universal, with everyone included? What was the total amount distributed and how was it funded?

The purpose of the scheme was to find out how people spend money given to them on a regular basis and that too without strings. So a research team was formed in partnership with Unicef. A total of 20 villages, similar in nature, were selected after a baseline survey: eight where money was to be transferred to each and every person through his/her bank account and 12 where money was not to be given – the second group is necessary to make comparison and draw conclusions about the use and outcome of basic income. Two tribal villages, one funded and one non-funded, were included later at the advice of an officer of the MP government, since the state has so many tribal villages, where people live in vulnerable conditions.

READ: Universal Basic Income: The big idea takes tiny steps


After selecting the villages, the question was how to fund the scheme and who should be the recipients. Should there be conditions? The team decided that it should be unconditional, as conditions may give space to corruption and also hamper the purpose of the survey as choice of spending would get limited. Secondly, should it be targeted or universal? We decided to make it universal, for two reasons; first, it was a pilot project, and second, we did not having the expertise to select [people for whom] it was most appropriate.

The third issue was who should be the recipient of the money? SEWA’s opinion was money should go to the female head of the family. But others had different opinions. So it was decided to ask women themselves what they thought about it. Several women of the selected villages were invited to Delhi and they all were of the opinion that money should be given to all members of the family; otherwise, the male members might feel bad and get angry too. We included children too, to know how elders use money of their share, whether it is used for their education, health or nutrition and so on. In fact, the hypothesis the research team wanted to test was that people are generally capable of making their own decisions and do so in the best interests of themselves, their children and their families rather than spending it on bad habits like tobacco or alcohol.

The next issue was the quantum of amount. How much should it be? Certainly not equal to the minimum wages or so little that it may have no meaning. Ultimately, it was decided that an amount between a half and a third of the average BPL monthly income should be given to each person of the village irrespective of caste or class. An amount of Rs 300 per adult [Rs 150 per child] was transferred to their accounts every month. In case of those below 18 years of age, the amount was transferred to their mother’s account [in her absence, it would be the female head of the family]. Individual transfers were made to access utilisation by different types of individuals within a family including, for instance, the elderly, women or differently-abled persons.

This pilot project ran for 18 months, from June 2011 to December 2012. It was funded by the Unicef and the total spending was '1.84 crore.
Addressing the bank account problem was tricky. Those without it were asked to get it opened within three months. In the meantime, the amount was handed over to them personally.

What was the outcome? How different is the second phase of the project, which is currently on?

Results were tremendous and highly positive. In the very beginning, people were told that the amount they were going to get every month was their basic income and they were free to spend it the way they wanted to. Three surveys were done to assess the impact: apart from the baseline survey, there was a mid-line survey after six months of the launch of the project, and an end-line survey on completion. There was a community survey to know the difference in spending patterns, if any.

It was found that people, especially the poor, spent more on their economic or productive assets, like buying agricultural equipment and animals. In tribal areas, people have land. In the baseline survey, most of the women said that they worked as labourers, but in the end-line survey, their answer was, “We do farming in our own fields.” This means that minimal cash help changed their status. For farming, in the absence of cash, they have to take loan for inputs like seeds and fertilisers or pay rent on water pumps. Now, with cash in hand, they bought water pumps, pipes, seeds etc. Many bought animals and started selling milk. Many said they paid their loans with this amount, and now that they were debt-free, they could invest their earnings in some productive work.

In the middle class, the spending was more on girls’ education. Many women bought sewing machines, either for personal use or for setting up tailoring units that brought in some money.

Third, noticeable spending went to the health sector. Women who generally avoid going to the doctor started taking medical treatment and the elders became regular in taking their medicines. In the baseline survey, women had said that in case of any health problem they depended more on home remedies rather than going to a doctor. But in the end survey, many said that now they went to a ‘Bangali’ [private] doctor for treatment. Some families also spent the money on safe drinking water and toilets.

We also inquired whether consumption of liquor among men had increased. The answer was ‘no’.

So the outcomes of the pilot project were very encouraging in the context of economic and social development. Now, after four years, we have just started another survey, that is, a legacy survey. It is to find out if the quality of life and economic health of the recipient villages or families have gone up, remained the same or gone back to square one in the absence of basic income during these four years. In other words, we want to know if the positive impact still persists or has gone with the wind.

Since last year, there has been a debate over basic income in India and even speculation that the next budget may announce some version of it. What would be your policy suggestions for national action? In particular, should it be completely universal or restricted to the needy?

Frankly speaking, it is not yet clear to me if basic income should be universal or targeted in India. We have a huge machinery to identify the needy, but the problem is two-fold: one is of corruption, and the other of people not being able to answer the questions officials ask them. As a result, they often get dropped from the list of beneficiaries.

In most of the countries where this scheme has been launched, it is targeted; Iran being an exception. I would say that if it is implemented in India, it should have maximum inclusion.

On the one hand, it is said that the notion of universal basic income has support from both the left and the right worldwide. On the other hand, some economists have been warning against it, because they argue that in order to finance such an ambitious and large-scale scheme, some subsidies will have to be withdrawn – and these withdrawals may affect the PDS as well as the government spending on education and healthcare. How do you respond to this argument, and what would be your suggestion for financing such a scheme at the national level?

I believe that the state is responsible to its people for infrastructure, food security, schools, healthcare system, drinking water, toilets, irrigation, roads, electricity, banking. These are the basic needs and can’t be left to the market forces. No government should or try to get rid of it.

Now the question is: does the government have so much money to fund the basic income scheme? Let me explain. In one village, say, there are  320 welfare schemes going on, and in every scheme money was being spent for people. So, it would be wrong to say that the government does not have money. Without going into the left or right arguments in this context, my humble submission is, in our country, where people die of hunger, PDS cannot be stopped abruptly, or in a day or two – in spite of the fact that it is full of corruption.

As far UBI is concerned, it cannot be implemented in the whole country at once. It should be started as a pilot project in limited areas. To run the scheme and get the desired results, a certain system has to be developed. Bank accounts are a must. With the Jan-Dhan accounts many people have got access to financial services but many more are yet to. Many areas still do not have bank branches. For many people, ATMs are far away from their residential places and electricity shortages make them non-operative. Banking correspondents [also known as ‘business correspondents’] are not active. Until all these services get universal reach and access and easy withdrawal becomes a reality, UBI will remain an idea… though I believe it should be implemented.

feedback@governancenow.com

(The interview appears in the February 1-15, 2017 issue)

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