National basic minimum income is more relevant now than ever before

A well-designed national basic income scheme in the form of direct cash transfers could reduce the structural inefficiencies associated with these schemes

Hiranya K Nath April 05, 2019 14:26:25 IST
National basic minimum income is more relevant now than ever before
  • The peace and prosperity of a society is intricately related to the incidence of poverty

  • A national basic minimum income — more than just providing for food and clothing — would save millions from making poor decisions

  • It is a moral imperative that the country not only creates an opportunity for the unfortunate, but also puts a brake to rising income inequality

"...It’s the uncertainty…", repeated Purna (not his real name) when I visited him a few years ago, after learning he had been ill with several chronic medical conditions. I could not see him for a few years as I was busy pursuing my own dreams. Purna is my childhood buddy with whom I grew up in a rural community on the north bank of Brahmaputra in Assam in the late 1970s and early 1980s.

When his father passed away due to cancer, Purna, then 16, had to drop out of school to support his mother and two brothers. His family had to sell the tiny plot of agricultural land it owned, to partially cover the cost of the basic treatment for his father. Purna started earning by making various traditional household items with bamboo, and occasionally writing signs and banners. His mother would work in the neighbours’ fields or as a domestic help. For a while, they earned enough for his brothers to attend school.

National basic minimum income is more relevant now than ever before

Representational image. Reuters.

Purna got married and fathered two boys, but his income started dwindling as the market for his products shrank due to a change in people’s preferences toward factory-made plastic items and computer-generated signs. Initially, he would supplement his earnings by working as a daily wage worker. It was during this period that he took to drinking. As he said, it was the uncertainty of not knowing where the money would come from, for the next day’s food, to pay for the children’s school and other necessities. After a while, it started taking a toll on his health. As he became increasingly disabled, his wife stepped up to be the breadwinner. Along the way, their eldest son — who, Purna believes, had a knack for engineering — began his apprenticeship to be a mechanic at the local mobile phone repair shop. The kid had barely finished his secondary education.

Like Purna, there are millions who don’t know where their money will come from. They end up making poor choices that push them into the poverty trap.

As numerous studies show, these decisions have consequences not only for the decision-makers but also for the larger society. The peace and prosperity of a society is intricately related to the incidence of poverty. At the fundamental level, a national basic minimum income — more than just providing for food and clothing — would save millions from making poor decisions by eliminating or reducing uncertainty. It is more relevant now than ever before.

It's an act of desperation by the Congress

With the onslaught of mechanization in agriculture, manufacturing and even services, the prospect of generating employment for unskilled, semi-skilled, or even skilled workers in large numbers, has been bleak. These developments have further added to the uncertainty.

India has achieved faster economic growth since the 1990s. This period has also witnessed a substantial reduction in the rate of poverty and a rise in income inequality. India still has a sizeable population living under poverty. It is, therefore, a moral imperative that the country not only creates an opportunity for the unfortunate, but also puts a brake to rising income inequality.

A national basic income could be the vehicle for achieving these dual objectives. It needs to be emphasized that the moral argument is more about creating opportunities than about creating a misplaced sense of right.

Since Independence, India has been implementing several social safety net schemes that involve ‘in-kind’ and — in recent times — limited cash transfers. Most policy evaluation studies acknowledge there is widespread pilferage and misuse of resources allocated to these programs. Consequently, the intended beneficiaries receive only a negligible proportion of the benefits. In fact, Purna told me how he worked for much less than the guaranteed 100 days a year with a job card under the Mahatma Gandhi National Rural Employment Guarantee Act, and how money was siphoned off by unscrupulous Panchayat officials. A well-designed national basic income scheme in the form of direct cash transfers could reduce the structural inefficiencies associated with these schemes and improve the well-being of the recipients’ by expanding choices and reducing financial constraints.

It can be argued that a basic income scheme would create the moral hazard of making people lazy and idle. Yet, knowing my friend Purna and many others like him, I would say that if such a scheme creates an enabling and empowering environment for even half of poor, society’s gain will be much larger than its cost. Furthermore, designing the best national basic income scheme with the least amount of inefficiencies would be a second order problem, for which I believe there are extremely able individuals with relevant expertise and experiences.

(Professor Hiranya K. Nath teaches economics at Sam Houston State University, Huntsville, Texas, USA, and works with rural communities in Assam, India, to create an enabling environment for individual as well as collective peace and prosperity through Good Neighbor Initiative)

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