MINIMUM INCOME GUARANTEE - UNIVERSAL BASIC INCOME
In the 1970s, USA and Canada tested the practice of Universal Basic Income (UBI) and found that there was still a large gap between the requirements of a decent living and the availability of resources. The UBI or Basic Income Guarantee (BIG as it was known in US and Canada) was aimed at elderly and disabled and not for all. But by the end of the decade and the beginning of the new decade, the BIG was more or less forgotten and now it is almost done and dusted.
The UBI found some traction in many European nations in the early 1980s. There were clamour for the UBI in many countries from unemployed outside of political parties and spectrum. Groups were formed forcing some social changes in respect of the laws of the country to introduce UBI. Some of the nations were thrilled by the famed economist Milton Friedman's proposal for a negative income tax. However, not many nations joined the bandwagon to start the experiment in their nations, though there is a clamour for such a social welfare system by the unemployed in many countries.
Finland, one of the European nations, introduced the UBI on a pilot basis for a two year period of 2017-18. The data for the year 2017 is now available and the data for the year 2018 is expected to be released only in 2020 thanks mainly due to the country's peculiar procedure in collecting data and processing it, which gives rise to a delay of a year in data availability. It was found this UBI welfare measure to the jobless poor people was hailed by many beneficiaries who were either not having a job or a regular income. There were people who were happy with this but the realisation that this would not continue beyond 2018 was a dampener to many. A few, whose reactions had been filmed to study the effects of the pilot, were in support of the continuation and worried about their future once discontinued. However, the experiment had been ended in 2018 and not continued in the current year.
The experiment in India was started on a pilot basis in twenty villages in Madhya Pradesh state in the central India. The pilot conceived in 2010 and started in 2011 on the model of negative income tax proposal by Friedman. From the data collected from these pilots, positive results came out and the villagers spent more on food and healthcare; the attendance and performance at school improved better; the school drop rates reduced drastically. There are also increase in personal savings and new business ventures in these pilot villages.
Traditionally, the villagers in India had been falling into the clutches of money lenders though there is an extensive coverage of banks in many parts of the country. The country adopted the micro finance model successfully implemented in Bangladesh by the celebrated Nobel Laureate Mohamed Yunus. Though the micro finance set up has gained lot of ground, still the money lenders rule roost in many villages. The villagers resort to local money lenders for easy hassle free loans as compared to many procedural delays in an organized lender like a bank or even a micro-finance company. A few years earlier one of the micro finance company ran into problems with the Reserve Bank of India for its usurious practices and very high interest rates. This has also given rise to secondary lending by some of the beneficiaries of the micro finance companies. The actions by the government and the Reserve Bank of India had acted as a dampener to the further growth of micro finance institutions in the country.
The government of India in a recent budget proposal as an interim budget for the election year has provided for a payment of INR 6000/- (USD 87/- approximately) every year, to the small and marginal farmers whose land holding is not exceeding a certain limit, directly into their bank account. Some of the actions of the government of India, like opening of bank accounts to many villagers who did not have any bank account despite 50 years of bank nationalisation; transferring the amount of subsidy or money payable directly into those bank accounts etc. have proved to be very popular in that they have removed a few layers of middlemen and presentation of documents and papers waiting eternally for the payment to come through. The government of India had started the payment in installments with the first installment transferred within a few days of the budget and the next installment in the last few weeks. This has been proved beneficial to most of the beneficiaries. This concept has left out many un-employed and landless labour in villages and in the urban areas. Whether the pilot done in the twenty villages in the central Indian state can be extended to cover the entire nation is to be examined and done.
However, in recent electoral promises the president of the main opposition party had said that if elected to power, the party will extend the coverage to all over the country with a stated sum of INR 12000/- every year to all the poor people doubling the present amount paid by the government of India only to poor farmers. Though there is a catch in that the scheme proposed by the opposition party is only a top-up in that if the beneficiary has any income only the difference will be paid by the government so that the poor will have a standard income of INR 12000/- a year.
The genesis for this is in the economic survey for the year 2016-17. The survey presented a proposal of a payment of INR 7620/- as an alternative to the various welfare programs at present. At this level the survey proposed that it will be about 4.9% of the GDP as against the more than 5% spent on many welfare measures. The opposition party has latched onto this survey proposal but pointedly increased the amount whereby the hit on the GDP may be higher than the proposal in the survey. The former finance minister, who was in different avatars in the earlier government of the present opposition party for a decade, never once thought of this while in power but vociferously supported this proposal by the president of his party saying that it is doable. There is also no clarity on the issue of withdrawal of other welfare measures already in vogue.
However, there is a targeted attack on the proposal especially in the social media by many; they never were aware that there is an ongoing project in twenty villages in the central Indian state; and this state was ruled, by the party in power in the center presently, for over a decade until recently. Not only that, the proposed UBI or MIG as the main opposition party would like to call it, will replace many other welfare measures of the government of India and effectively the outgo on this proposal may not exceed a few decimal points to the current level of outlay of funds for many welfare measures. The only note of caution that is to be exercised is the identification of the beneficiaries and the norms set for that. This area is likely to create a lots of corruption and unwanted and anti social practices. The government whichever party forms post elections is likely to extend the pilot project in Madhya Pradesh across the country. The extension of the pilot may also be done in stages over the next five or eight years instead of in one single go across the country; as this will create voluminous data for processing and create unnecessary and unwanted practices.
Finland, one of the European nations, introduced the UBI on a pilot basis for a two year period of 2017-18. The data for the year 2017 is now available and the data for the year 2018 is expected to be released only in 2020 thanks mainly due to the country's peculiar procedure in collecting data and processing it, which gives rise to a delay of a year in data availability. It was found this UBI welfare measure to the jobless poor people was hailed by many beneficiaries who were either not having a job or a regular income. There were people who were happy with this but the realisation that this would not continue beyond 2018 was a dampener to many. A few, whose reactions had been filmed to study the effects of the pilot, were in support of the continuation and worried about their future once discontinued. However, the experiment had been ended in 2018 and not continued in the current year.
The experiment in India was started on a pilot basis in twenty villages in Madhya Pradesh state in the central India. The pilot conceived in 2010 and started in 2011 on the model of negative income tax proposal by Friedman. From the data collected from these pilots, positive results came out and the villagers spent more on food and healthcare; the attendance and performance at school improved better; the school drop rates reduced drastically. There are also increase in personal savings and new business ventures in these pilot villages.
Traditionally, the villagers in India had been falling into the clutches of money lenders though there is an extensive coverage of banks in many parts of the country. The country adopted the micro finance model successfully implemented in Bangladesh by the celebrated Nobel Laureate Mohamed Yunus. Though the micro finance set up has gained lot of ground, still the money lenders rule roost in many villages. The villagers resort to local money lenders for easy hassle free loans as compared to many procedural delays in an organized lender like a bank or even a micro-finance company. A few years earlier one of the micro finance company ran into problems with the Reserve Bank of India for its usurious practices and very high interest rates. This has also given rise to secondary lending by some of the beneficiaries of the micro finance companies. The actions by the government and the Reserve Bank of India had acted as a dampener to the further growth of micro finance institutions in the country.
The government of India in a recent budget proposal as an interim budget for the election year has provided for a payment of INR 6000/- (USD 87/- approximately) every year, to the small and marginal farmers whose land holding is not exceeding a certain limit, directly into their bank account. Some of the actions of the government of India, like opening of bank accounts to many villagers who did not have any bank account despite 50 years of bank nationalisation; transferring the amount of subsidy or money payable directly into those bank accounts etc. have proved to be very popular in that they have removed a few layers of middlemen and presentation of documents and papers waiting eternally for the payment to come through. The government of India had started the payment in installments with the first installment transferred within a few days of the budget and the next installment in the last few weeks. This has been proved beneficial to most of the beneficiaries. This concept has left out many un-employed and landless labour in villages and in the urban areas. Whether the pilot done in the twenty villages in the central Indian state can be extended to cover the entire nation is to be examined and done.
However, in recent electoral promises the president of the main opposition party had said that if elected to power, the party will extend the coverage to all over the country with a stated sum of INR 12000/- every year to all the poor people doubling the present amount paid by the government of India only to poor farmers. Though there is a catch in that the scheme proposed by the opposition party is only a top-up in that if the beneficiary has any income only the difference will be paid by the government so that the poor will have a standard income of INR 12000/- a year.
The genesis for this is in the economic survey for the year 2016-17. The survey presented a proposal of a payment of INR 7620/- as an alternative to the various welfare programs at present. At this level the survey proposed that it will be about 4.9% of the GDP as against the more than 5% spent on many welfare measures. The opposition party has latched onto this survey proposal but pointedly increased the amount whereby the hit on the GDP may be higher than the proposal in the survey. The former finance minister, who was in different avatars in the earlier government of the present opposition party for a decade, never once thought of this while in power but vociferously supported this proposal by the president of his party saying that it is doable. There is also no clarity on the issue of withdrawal of other welfare measures already in vogue.
However, there is a targeted attack on the proposal especially in the social media by many; they never were aware that there is an ongoing project in twenty villages in the central Indian state; and this state was ruled, by the party in power in the center presently, for over a decade until recently. Not only that, the proposed UBI or MIG as the main opposition party would like to call it, will replace many other welfare measures of the government of India and effectively the outgo on this proposal may not exceed a few decimal points to the current level of outlay of funds for many welfare measures. The only note of caution that is to be exercised is the identification of the beneficiaries and the norms set for that. This area is likely to create a lots of corruption and unwanted and anti social practices. The government whichever party forms post elections is likely to extend the pilot project in Madhya Pradesh across the country. The extension of the pilot may also be done in stages over the next five or eight years instead of in one single go across the country; as this will create voluminous data for processing and create unnecessary and unwanted practices.
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