Economy

Watch: Jay Panda on the Idea of a Universal Basic Income

In conversation with BJD MP Jay Panda.

Hello and welcome to this Facebook live on The Wire with Jay Panda, a four time member of parliament from the Biju Janta Dal – a centrist party that exercises great influence because of the number of MPs it sends to the parliament. We have Jay Panda with us today because he is one of the first lawmakers to have talked about, written about the issue of a universal basic minimum income for Indian citizens. An idea which is now being debate specially, in the post demonetisation phase because the government wants to do something for the people who indeed suffered a lot during the period of demonetisation – withdrawal of notes before replacement. Jay Panda wrote about this four months ago, the whole issue of universal basic minimum income for Indian citizens. Economists have also analysed this threadbare. Now the debate is still on and we have Jay with us to talk about in detail about some of the aspects and dimensions of universal basic minimum income for all Indians. Welcome to our show Jay.

Now tell us what gave you this idea? You wrote about this four months ago. What is it that triggered this thought process inside you? Was it your party? Did you discuss it with your party leaders? Is that your party position also that all Indians should have a guaranteed minimum income?

Well you know this is something that has been discussed globally for some years now, universal basic income UBI is arguably the hottest topic in developmental economies, it has been discussed all that way from developed countries like America to Europe…

Latin America and India. I wrote about it as you said about four months ago but many economists many of them from Indian origin such as Pranab Bardhan, such as Vijay Joshi of Oxford, others at the London School of Economics have been advocating it and this is in the context of the new economy of the 21st century not just in India but everywhere in the world having a lot of automation and robotics which means job creation is much less than before. For example today let’s say if we have 7% growth rate in the Indian GDP. It create less jobs than 7% growth rate would have created in 1990s.

You know you are going to have self driving cars, you don’t have jobs such as travel agents anymore, people do their own bookings with apps online so the number of jobs getting created at the same level of prosperity, same level of growth rate is much less and this could cause havoc throughout the world particularly the demographics that we have in Indian unless innovative solutions are thought of.

So what about India? Is India at the stage of development as some of the western economies are where jobs are threatened because of automation, is that the context or are you also proposing it because in India there is lot of poverty still and lot of unemployment maybe way higher than what the numbers suggest. So is that issue in India or is the issue that technology is displacing jobs in India also?

I think it’s both because the world bank has estimated that as much as 68% of existing jobs in India are under threat in the coming 10 or 20 years; again because of technology and because of automation and robotics, even factories which used to employ hundreds of people today can manage with only five or seven people because they use robots for manufacturing.

Here I want to say just to reinforce your point, somebody said that Reliance for instance have invested over Rs 2 lakh crores in Jamnagar refinery but because that whole plant is automated the total employment is barley maybe forty or fifty thousand. This is the case with power plants, case with textile units which are automated right.

We have the same thing. You have enormous new facilities coming up by companies such as Apple and Google in other parts of world. In America and China, although they involve billions of dollars of investment only create a handful of human jobs but that doesn’t mean these investment are not good because they bring about new technology, you need the investment, you need the economic growth but we have to recognise a new normal that if same level of prosperity, or same level of growth is not creating the same number of jobs as it was doing earlier we have to fill it up with some other alternative so economists around the world from developing countries to India and elsewhere are recommending that if we have a universal basic income, low level of income so that people are not destitute and then above that level they can get the jobs that are being created. So they are lot of nuances to it which we can discuss

So tell me, do you agree with the Pranab Bradhan’s formulation which you seem to have also captured in your article in The Times of India where Pranab Bradhan says that nearly 9-10% of India’s GDP is constituted by non merit subsidies? Now he argues that 10% of GDP which will roughly be about $200 billion dollars, GDP being two trillion is good enough to create a minimum guaranteed income for the entire population.

So I in my article, in doing my research I have quoted several economists including Pranab Bardhan, Vijay Joshi and many others and there seems to be consensus that counter intuitively India may be actually be a better case for a basic income the reason being very simple, as you said we have large number of informal sector work, people who don’t have formal jobs, they are not part factories or unions lot of domestic workers at the same time prosperity is growing in India and you are seeing economic growth you are seeing tax revenue is growing so maybe there is scope to allocate funds to provide a safety net for the bottom layer and maybe better than even than other countries for example Finland has started a trail where a selected number of citizens are going to get something like 600 dollars a month basic income and if it works they may expand the scheme. In America and Europe the problem is this- they have safety nets with large chunk of their GDP going towards that expenditure which work reasonably well so taking away social security in America or taking away medicare or mediclaim would actually affect a huge number of people. Whereas in India we have expenditure of a certain level not as much as western countries but it is grossly inefficient everybody agrees that social sector expenditure in government has lot of leakages, the intended beneficiaries don’t get it so one of the arguments is If you can redirect that and give direct cash to the needy they will actually be better off than depending on theoretical services that they are apparently getting but in reality not getting.

And what is your calculation, how much income per month for a family is possible through this method?

So I am not an economist and I don’t want to make my own opinions but I have studied other people’s opinions so those who are supporting this have said something like Rs 1000 a month at the basic level per head

So family of five means Rs 5,000?

So these are all being discussed, various options, you know there are some counter arguments that you must keep in mind

I will come to the counter arguments

Let me explain, so some people worry that if will this be an disincentive for people to work, now look if you give a very high basic income yes it could be a disincentive and it’s not practical, the country can’t afford it

And PM Modi has also spoken about disencouraging dole economies. Will this be seen as dole or something?

We have hundreds of kinds of doles. We have PDS, Public Distribution System, which is meant to help the poor but it is a dole. Some of it works some of it doesn’t work, lot of it has lot of leakage.

But you are saying it’s a dole to deal with changing structure of the global economy where technology is producing a growth but not enough jobs… and the Indian economy as well

So everybody is familiar with a famous comment of late PM Rajiv Gandhi in mid 80s that out of every rupee that government spends, the beneficiary only gets 15 paisa that was case in mid 80s. Today it has not improved much. the latest statistics I have are from about five years ago when the then planning commission had done a assessment of PDS and their assessment of about five years ago was that out of every rupee government spends on PDS only 27 paisa reaches the beneficiary that means 73 % of government expenditure on PDS is spent on salaries, wages and leakage (corruption) so there is the nub of why India may actually have a better case because with Aadhar if you can deliver cash directly into the hands of beneficiary then you are bypassing this corrupt leaky system and you can fund it from savings itself forget about how the numbers stack up

I find it interesting that economists from the right as well as the left are supporting this idea and at the people at the centre- I assume that yours is a centrist party you stand at the center. But I also find it interesting that some of the economists on the left like Jean Dreze has said that Pranab Bardhan’s idea that 10% of GDP is spent on non-merit subsidy and that it can easily be taken away and redirected towards a universal basic income to the Indian citizens. So Jean Dreze is faulting this simply because he argues that non-merit subsidy is being given to lot of needy people lower middle classes who get subsidised transport, who get subsidised college education, who get lot of hidden subsidies which are actually needed. He also argues that we cannot have a situation where what is needed to be spent on health, minimum percentage of GDP on education which has not reached as yet, those money is redirected towards universal basic income then it does not make sense. So that argument says that by all means have a social security payment but after meeting all these health, education, all these needs. How do you respond to this?

Let me respond to that, I have read Jean Derez’s critique of this. It is indeed ironic that the idea of a universal basic income has got support from as you said across the spectrum in the world including not just right of center, centrists economists some leftists economist but ironically even busines, this is getting lot of support from great entrepreneurs of Silicon Valley and some of them are suggesting that because of this joblessness crisis for the world because of automation and technology that this is a solution. Now, what Jean Dreze says I think we should consider in proper context. Now, this fear that all this expenditure that is happening is going to get stopped and cash is going to be given instead. First of all let’s understand, are these expenditures actually reaching the poor? The fundamental problem I cited to you the PDS studies of the erstwhile planning commission which shows that maybe three-fourth of the money is actually not reaching the poor… so putting more money down that black hole which is not serving the purpose is not a very logical thing to do. We have to think of other alternatives. The second thing we need to think about is that cash transfers or what is being called as DBT in India Direct Benefits Transfers is linked to this idea because instead of government providing goods and services, government gives cash to make you for it. This is an idea that has succeeded in many parts of world, in Latin America, in developed countries. And in India we have seen the example of LPG gas cylinders. Now, the issue that you raised which Jean Dreze raises about implicit subsidies which are hidden subsidies- I think the right way to look at it is- yes subsidies are needed by certain people particularly the desperately poor people but explicit subsidies are better than implicit subsidies because we do not have efficient ways of monitoring how implicit subsidy is being spent, is it going to people? We just have these estimates that almost three-fourth of it is getting wasted. So it is much better to give those subsidies explicitly with the use of technology such as Aadhar, such as JAM trilogy and directly give it to the hands of needy citizen, those who need it.

So Jay the fundamental question the left economists are raising is- if you believe in universal primary education and universal health services which all governments are committed to including this one, then should you do the universal basic income after meeting those requirements or should some other spending that would go into universal healthcare and education also be handed down as cash as part of universal basic income.

We are talking apples and oranges. Let me clarify. Let’s not conflate this. This is like asking the question that should we consider your survival after you get education and after you get health. It’s a ridiculous question, because this is considered…

You are saying they can go parallelly

See you can’t talk that education and health is more urgent than your survival. It’s crazy. So yes, government has an obligation to provide education and government must exercise its obligation and health facilities but there are many ways to do it. For example we know that our primary health centres in the rural areas are pathetically run. There are some experiments being tried where you co-opt in PPP models. You co-opt the private sector and they provide those health services. I think Rajasthan is trying it out. Now in schools- we know that schools run by NGOs, schools by missionaries of various religions do much better than the government run schools. Government run have better facilities, teachers get better salary and yet schools running in slums, schools run by NGOs, schools run by missionaries all have better results with less infrastructure with less pay for teachers so we should co-opt those systems.

So you are saying it need not to be either-or

It doesn’t have to be.

It can go parallelly

I think these are different tools of achieving various objectives and whether government actually provides good or services or provides the cash and enables the citizens to get those services for herself or himself. These are all different tools for same objectives.

So Jay we have some questions which have come from our Facebook viewers and one is from Saksham Khosla- what’s the most feasible UBI design for India- a minimal cash transfer that universal or more substantial outlay that makes pension and maternity benefits universal?

That’s a good question. Now throughout the world I think the thinking is that if you make a substantial basic income it could start interfering with the motive to work itself so you are not looking at a situation where robots do all the work and all humanity just lazes around and goes on holiday. That’s not what we are envisioning. We are thinking of UBI as a basic supplement so that you are not destitute. Beyond that you must have an incentive to work because it’s not like jobs are disappearing. There will be jobs and we must create the kind of education and training where you can avail of those jobs. Now, universal or not is another issue. Now one question that’s being asked is that why do you and I need the basic universal income.

Absolutely.

Right. So there are two arguments on this. Some people say that universal solves the fundamental problem of targeting. So everybody including you, me and big industrialists maybe entitled to the same Rs 1,000 but we may not draw it. It may not be worth the time of a big industrialist to go and draw Rs 1,000 or you and me. But that Rs 1,000 a month make a huge difference to hundreds of millions of people. Then you solve the problem of the corruption the leakage and targeting that goes. Government wastes enormous time and resources trying to identify who should get it, who should not get it. You have people going around villages checking whether you have a pucca house or katcha house or lights or fans. All that effort is wasted if you give…

You are saying there is some kind of self selection.

That’s one thing

The better off may not go for it

But the counter argument is that with technology and with data available today, targeting is much easier today than before so some economists are proposing that it should not be UBI (Universal Basic Income). It should be targeted and we can do targeting much more efficiently.

Targeted minimum basic income.

Yes. And I am open either alternative because this needs much more discussion. We need to debate this much more.

This is one of things which need to be resolved through debate.

I am very keen on a basic income, whether it should be universal or targeted is something I have an open mind about.

What’s the sense you are getting from the government? Do you think government also is looking at it because I read somewhere that chief economic adviser might mention this in his economic survey as possibility.

Because I was the first one from the political arena to write this article

You might have got some feedback

No, I have been getting a lot of questions but like you I don’t have any special angle into the government. You asked a question earlier on which is relevant that post demonetisation this buzz has picked up that will the government come in with some kind of basic income…

In fact it has picked up. In fact people are saying that this idea which you wrote about and other economists are talking about becomes very relevant post demonetisation because PM Modi has promised the poor people who seemed to have suffered a lot with note and currency withdrawal, he wants to compensate them.

To be fair, this idea has been discussed for several years and even my article was two months before demonetisation. And to be fair what the PM has done in aggressively pushing removing LPG subsidy, cooking gas subsidy from the middle class and giving it to poor and using Aadhar and DBT is actually one aspect of universal basic income. To say that demonetisation has triggered it, I think is not entirely fair

Not triggered but has created a greater traction for it

Look I think demonetisation has created a lot of traction for various new ideas. There is talk that tax rates should be cut. There was talk and it has already happened that interest rates have come down. Now in that context this could be another idea which gets a boost because of demonetisation but that’s not the fundamental reason behind it.

Another question Jay for you is- can UBI coexist with MNREGA and PDS? This is the issue that lefts economists are also raising. Whether you withdraw all his and collapse it into a basic income scheme or can they exist side by side?

So we have hundreds of different social expenditure schemes of government both at union government level and at state government level. Government gives bicycles, umbrellas, blankets, food through PDS, government gives MNREGA which is job work. Now at some point which is I think far distant in the future we will have to start talking about do we have some worthy scheme or do we have a basic income instead but right now we have plenty of opportunity to get rid of a lot of unworthy schemes. That 72% leakage that happens in PDS also happens in lot of other government programmes and where ever is massive leakage, kerosene for instance. Everybody knows the kerosene that we subsidise  which is suppose to go to rural poor so that they have some fuel instead of cutting firewood which is bad for the environment, everybody knows that the vast majority of kerosene does not go to the rural poor, it is hijacked. With lot of corruption it goes into the transport sector, it sold to truckers used to adulterate diesel. I think that’s a prime candidate for doing away. You can give the same LPG subsidy and the saving that you make can allow you to give a basic income maybe targeted for the kind of people who would be theoretically depending on kerosene. So there are lots of such programmes that I think we can agree upon. Whether MNREGA or not is further off in the distance.

Jay the problem with PDS is some state are running PDS very well, they are generally better governed states like Tamil Nadu

Orissa. In fact Jean Dreze himself has written about Orissa

So Bihar, UP, MP not governing PDS very well, maybe a case for giving cash directly there but states doing it well can argue why dismantle a system that working well

So let’s understand what working well means, on average on PDS as I said the data shows that more than 70% is leakage throughout the country. In Orissa when we say it works well I think it’s in reverse- maybe 70-75% reaches the people but still not 100%. And still in other states there is no 100% so if states like Orissa and Tamil Nadu have 70-80% efficiency is that good enough? Is 20% leakage okay? And if these states are considered doing well, for the average to be only 27% doing well that means there must some states where only 10% is reaching 90% leaking. So to say that the system is working some places is I think… yes obviously it’s doing well in Tamil Nadu and Orissa but I don’t think its serving the purpose. Enormous government infrastructure goes into running the system and apart from PDS there are lots of other schemes which are not running well. Look, cash transfer or DBT is not the solution for everything. For example it works where there are markets to provide those services. In some rural areas there are no proper markets so if u just give cash to the citizen she or he may not be able to go and buy vegetables and rice because there may not be a proper market in that place. So wherever markets are functioning and in large parts markets function well, I think cash transfers or universal income works well. Wherever there is a physical deficiency government needs to provide certain physical good and services I think there is still room for that.

Finally Jay, last question. In true spirit of federalism, you think states can be given flexibility on how they want to design it? Centre can come up with basic framework of a minimum guaranteed income then the states are given some flexibility. If Kerala feels PDS is working well or suppose Naveen Patnaik feels going on PDS is fine. Maybe other schemes which are not doing well they want to collapse into a basic income delivery. Will that work?

See of course there is no one size that fits all. In a country of India’s size and variety, my party Biju Janta Dal has been a very strong votary of federalism, even the PM himself because he said as a former CM he recognises… so there is scope I think within and overall frame work about state specific. Take an existing government programmes like sarwa siksha abhiyan which has been used to build lot of primary school infrastructure. Now you have a huge difference between a state like Kerala and state like Orissa. Kerala has almost 100% literacy, Orissa has almost 70% literacy. So our need for primary education budget is more than Kerala’s need for primary education budget, they may want that money somewhere else. Same analogy can be applied to structuring UBI or targeting basic income. There ought flexibility within the overall parameter.

Let us hope the design part of UBI is discussed and debated in parliament and we come up with something which is optimal for all the states. Thank you very much for talking to us. That’s all for now.