Universal Basic Income: Boon or Bane for farmers welfare in India

1. UNIVERSAL BASIC INCOME; BOON
OR BANE FOR FARMERS WELFARE
PRESENTED BY
ROBINSON RAJA J (M-6006)
DIVISION OF EXTENSION EDUCATION
EXT 600 MAJOR SEMINAR

2. INTRODUCTION
• India- Sixth largest economy in Nominal GDP
• Third largest economy in $PPP
• World’s average growth around 3.3%
• India’s growth is around 7%
• Top 10- Forex Reserves
SOURCE: WORLD BANK, IMF

3. INDIAN AGRICULTURE
• Largest producer of milk,
pulses and jute
• 2nd largest producer of Rice,
Wheat, Sugarcane, Groundnut,
Vegetables, Cotton and fruits
AGRI CENSUS 2015-16

4. AGRARIAN CRISIS
• Sharp decline in share in GDP but not in dependency
• Disguised unemployment
• Increase in marginalisation of operational land holdings
• Monsoon dependence
• Traditional methods of irrigation
• Severe stress of water availability
SECTOR GDP GDP EMPLOYMENT EMPLOYMENT
1947 2018 1947 2018
Agriculture 60% 16% 75% 49%
Industry 18% 28% 12% 24%
Services 22% 56% 13% 27%
SOURCE:CSO, MOSPI ,GOI

5. AGRARIAN CRISIS
• Falling price of agricultural commodities
• Absence of warehousing & agro-processing unit
• Recurring drought
• Inadequate crop insurance
• Deterioration of RCCS.
• Informal credit at high rates of interest.

6. AGRICULTURAL CENSUS 2010-11
SI. No Size-Group
Percentage of number of
operational holdings to total
Percentage of area
operated to total
1 Marginal (below 1.00 ha.) 67.10 22.50
2 Small (1.00 - 2.00 ha.) 17.91 22.08
3 Semi-medium (2.00 - 4.00 ha.) 10.04 23.63
4 Medium (4.00 - 10.00 ha.) 4.25 21.20
5 Large (10.00 ha. & above) 0.70 10.59

7. PARADOX OF INDIAN ECONOMY
• 1% Richest Indians holds about 58% of total wealth (Oxfam report)
• Median income of farmer- Rs 20000 pa (Economic survey 2016-17)
• Poverty-estimated by NITI Aayog on basis of monthly consumption expenditure data collected by
NSSO
COMMITTEE POVERTY RATIO POVERTY LINE (Rs /day)
Suresh Tendulkar 21.9 % 32.4 -Urban
27 -Rural
C Rangarajan 29.5 % 47 -Urban
32 -Rural
International Poverty Line 21.2 % 2nd max poverty in World
Multidimensional Poverty
Index
27.5% Maximum poverty in World

8. INDICATORS OF POVERTY AND DEVELOPMET
S.NO INDEX AGENCY DIMENSIONS RANK- 2018
1 MPI UNDP & OPHDI Health
Education
Standard of living
53/105
2 HDI UNDP Health
Knowledge
Standard of living
130/189
3 GHI IFPRI Undernourished
Child Stunting
Child Wasting
Child Mortality
103/119
4 IHDI UNDP Health
Knowledge
Standard of living
131/189

9. FARMERS SUICIDES
SOURCE:ADSI Report by NCRB

10. STATEWISE SUICIDES
Source:ADSI report by NCRB

11. CAUSES OF FARMER SUICIDES
Source: ADSI report by NCRB
SMALLAND MARGINAL FARMERS AGRICULTURAL LABOURERS
Farming
Related
Issues,
19.50%
Family
problems,
11.70%
Illness,
10.50%
Drug
Abuse/Addicti
on, 4.10%
Marriage
Related
issues, 2.00%
Poverty,
1.10%
Bankruptcy or
Indebtness
from Financial
Institutions,
38%
Family
Problems,
40.10%
Illness,
19.00%
Other Causes,
13.40%
Drug
Abuse/Addicti
on, 6.80%
Causes not
known, 6.10%
Poverty,
3.90%
Bankruptcy or
Indebtedness
from Financial
Institutions,
2.20%

12. UNIVERSAL BASIC INCOME-UBI
• Form of social security
• Everyone periodically receives an unconditional payment of money
irrespective of status and employment
• Basic income, citizen’s income- UK
• Basic income guarantee –US & Canada
• Basic living stipend, universal demogrant

13. HISTORY OF UBI
• Thomas More introduced the concept of guaranteed income in his book
Utopia in the year 1516
• Thomas Paine- 18th century- National fund, out of which shall be paid to
everyone
• Paul Samuelson- National system of income guarantees and supplements
• Martin Luther King Jr- simple, easiest solution to poverty- MIG
• Mark Zuckerberg- support to workforce displace by automation

14. UBI IN WORLD

15. UBI
“Wiping Every Tear from Every Eye”
PRINCIPLES:
• Universality
• Unconditionality
• Agency

16. BOON FOR FARMERS
Social Justice
• A society fails to guarantee a decent minimum income to all citizens will
fail the test of justice
• Access to basic goods and a life of dignity
• Like many rights it is unconditional and universal
• Test of non-exploitative society

17. BASIC VALUES
UBI
greater
productivity
Promotes
efficiency by
reducing waste
in government
transfers
Promotes
liberty (anti-
paternalistic
Promotes
equality by
reducing
poverty
All are equal
Promotes basic
values of
society equal

18. AGENCY
• Poor – treated as objects of government policy
• Well intentioned Welfare schemes – inflicts an indignity upon poor by assuming
that they cannot take economic decision
• Unconditional cash transfers treat them as agents
• Circumstances that keep individuals trapped in poverty are varied
• State is not in a best position to determine risks and mitigate properly
• Taking the individual as unit of beneficiary not household

19. EMPLOYMENT
• Flexibility in labour market
• No menial work
• Non- exploitative bargaining
• Demographic dividend – increase in share of young people in population
• Loss of employment due to automation and AI in near future
SOURCE: Economic Survey 2016-17

20. ADMINISTRATIVE EFFICIENCY
• Weakness of existing welfares schemes riddled with misallocation, leakages and
exclusion of poor
• JAM-TRINITY (Jan- Dhan, Aadhaar and Mobile)
• Fully adopted- more efficient
• UBI reduces out of system leakage
• Transfers directed straight to beneficiaries bank accounts
• Monitoring UBI would be easier than many schemes

21. NO EXCLUSION ERROR
• Universal- No Problem of beneficiary identification
PROBLEMS OF BENFICIARY IDENTIFICATION:
• Self-reported income in 1992, 2002 list for identifying BPL
• Targeting was both inefficient and inequitable
• Tendulkar poverty line- Rs 32.40 and Rs 27/ day for Urban and rural areas
• SECC(SOCIO-ECONOMIC CASTE CENSUS)-2011
• Higher the coverage, lower the leakage (Himanshu and sen 2013)

22. INCLUSION-EXCLUSION ERRORS
CAG Report on 2008 Agricultural Debt Waiver
• 8.5% of beneficiaries audited -not eligible for debt waiver (20.5crore)
• 13.5%- Eligible people but not consider by lending banks
• 34%- certificates not issued properly
• Denied benefits but names appeared in the list
• Compensating farmers -not in dire need of a blanket waiver

23. PDS TARGETING (2011-12)
SOURCE: IHDS 2011-12

24. INSURANCE AGAINST RISK
• Poor households often face Bad health, Job loss, Natural disasters
• Slightly more than 50% of rural households face one or more forms of shock
• Prominent- Crop loss, Water borne diseases, loss of property, Cyclones (Jha,
Nagarajan, 2012)
• About 60 percent of individuals use personal savings to cope with these shocks
• Government assistance only 10%
• 6% borrowing from friends

25. CASH VS PSYCHOLOGY
• Preoccupation with daily hassles results in depletion of cognitive resources required
for important decisions (WB Report 2015)
• Pre-harvest cash-strapped sugarcane farmers in Tamilnadu performed worse in a series
of cognitive tests (10 points lower on an IQ TEST) than they did after harvest
(mani 2013)
• Unconditional cash transfer programme in Kenya brings significant increase in
psychological wellbeing of recipients (Haushofer and Shapiro 2015)

26. FINANCIAL INCLUSION
• Progressed substantially since PMJDY
• Ownership of bank accounts increased to about 2/3rd of all adults in India
• Active use increased to about 40 percent (FII-2015)
• A UBI of INR 6000 per adult per year reduces the average distance of banks
from 4.5 km to 2.5 km

27. IMPROVED FINANCIAL INCLUSION
FINANCIAL INCLUSION INSIGHTS 2015

28. RISE OF FORMAL BANKING WITH
EXPENDITURE
Economic Survey 2016-17

29. DISADVANTAGES OF UBI
• Conspicuous spending on temptation goods
• Moral Hazard (reduction in labour supply)
• Gender disparity induced by cash
• Too much stress on the banking system
• Fiscal cost given political economy of exit
• Political economy of universality-ideas for self-exclusion
• Exposure to market risks ( cash vs food)

30. TEMPTATION GOODS VS CONSUMPTION
EXPENDITURE
• Increase in income from UBI alone will not necessarily lead to increase in
temptation goods
SOURCE: NSS0 2011-12

31. MORAL HAZARD
• Free money makes people lazy and drop out of labour market
• Unearned income is undesirable
• No need of morality while talking about vulnerable people
• Money is given equal to poverty line
• No significant reduction in labour supply for men or women from the provision
of cash transfers (Banerjee et al., 2015)

32. FISCAL SPACE TO FINANCE A UBI
• Rs 5400 per year in 2011-12 and Rs 7620 per year in 2016-17
• Any program cannot strive for strict universality
• So a target quasi-universality rate of 75 percent is set ( de facto UBI)
• UBI decline to Rs 6540 per capita per year costing 4.2 percent of GDP
• Government will have to decide on what programmes/expenditures to prioritize
in order to finance a UBI
• Shortest path to eliminate poverty, it should not become the Trojan Horse

33. FISCAL COST OF EXISTING CENTRAL
GOVERNMENT PROGRAMS
SOURCE: ECONOMIC SURVEY 2016-17

34. FISCAL COST OF EXISTING CENTRAL
GOVERNMENT PROGRAMS
SOURCE: ECONOMIC SURVEY 2016-17

35. UBI VS FARM LOAN WAIVER
ELECTION
LOAN WAIVER
EXPECTATION
NPA
INCREASES
BANKS
REFUSE
LOAN
LOAN FROM
MONEYLENDERS
@HIGH INTEREST
SUICIDES

36. UBI Vs SUBSIDIES
• Efficiency Vs Inefficiency
• Unconditional Vs Conditional
• Universal Vs Targeted
• Flexibility Vs Rigidity

37. GUIDING PRINCIPLES FOR SETTING A UBI
DE JURE UNIVERSALITY, DE FACTO QUASI-UNIVERSALITY:
• If Universality has powerful appeal, it will also elicit powerful resistance
• Keeping in mind fiscal costs, the notion of transferring even some money to
the well-off may be difficult
• Targeting is needed

38. GRADUALISM
• UBI must be embraced in a Deliberate phased manner
• Allows reform to occur incrementally- weighing the costs and benefits at every
step
• Choice to persuade and to establish the principle of universality not additionality
• UBI as a Choice to beneficiaries of existing programs rather than in addition to
current schemes

39. TARGETING
• Define the non-deserving based on ownership of key assets such as
automobiles or air-conditioners or bank balances exceeding a certain size
• Adopt a ‘Give it up’ scheme wherein those who are non-deserving chose to opt
out of the programme just as in case of LPG
• Publicly display “name and shame” the rich who chose to avail themselves of a
UBI
• Self-targeting

40. UNIVERSALIZE ACROSS GROUPS
• Giving money to women improves the bargaining
power of women within households and reduces
concerns of money being splurged on conspicuous
goods
• Phase UBI for certain vulnerable groups- widows,
pregnant mothers, the old and the infirm-first
• Support the most vulnerable

41. CASE STUDY ON UBI
• SEWA BHARAT-UNICEF STUDY ON BASIC INCOME TRANSFERS
• Davala et al in Madhya Pradesh
UBI ON AGRICULTURE SECTOR:
• Shift from wage labour to own cultivation
• Small and marginal farmers begin to invest more into their own cultivation
• Positive jump in agricultural production
• Positive effect on indebtedness which is chronic in case of small and marginal farmers

42. CASE STUDY ON UBI
• People become more productive when they get a basic
income
• Basic income is not meant to replace employment
• acts as a cushion to survive even under extreme situation
• If the right amount is given as a basic income, the
positive effect is disproportionately higher than what
the monetary value is under normal circumstances

43. EFFECT OF UBI ON CONSPICUOUS
SPENDING
• No statistical evidence of any increase in economic bad such as consumption of
alcohol and tobacco
• In Bhil tribal village, there was actually a drop in consumption of alcohol
• People had liquidity to use for agricultural inputs

44. UBI AMOUNTS, POVERTY RATE AND COST TO GDP
SOURCE:NSSO & IHDS 2011-12

45. RYTHU BANDHU SCHEME
• Telangana Government- 25th February 2018
• 1st in India
• Agriculture Investment Support Scheme
• Spent Rs 12000 crore during both seasons
• Rs 8000 per acre was given to land owning farmers
• No land ceiling limit.

46. KALIA-ODISHA
• Krushak Assistance for Livelihood and Income Augmentation
FINANCIALASSISTANCE
RS 10000 for taking cultivation Rs 12500 – goat rearing, mushroom etc
COVERAGE
Interest free crop loan up to Rs 50000 92% of cultivators & AL
KALIA
RS 10810 Crore 3 years till 2020-21

47. PM-KISAN
• Assured income support to small and marginal
farmers up to 2 hectares
• Pradhan Mantri KIsan SAmman Nidhi
• Direct income support of Rs 6000 per year in 3
instalments of Rs 2000 each
• Annual expenditure of Rs 75000 crore
• Meet emergent needs especially before harvest season

48. GUARANTEED MINIMUM INCOME
• System of payment by a government to citizens
who fail to meet one or more means tests
NYAY-NYUNTAM AAY YOJANA
• Plan is to give Rs 6000 every month
• Bottom 20% of population of around 5 crore
families or 25 crore individuals

49. CONCLUSION
• Agriculture distress- large number of reasons
• Boon for the farmers compared to subsidies and farm loan
waiver
• If Right amount is given as basic income, the positive effect
is higher
• Solve the problem of poverty in short term
• Agricultural reforms including extension and marketing
reforms are needed

50. THANK YOU