This is a guest post by V. Janardhan

(Dr. V. Janardhan is a sociologist at the Department of Sociology, University of Hyderabad, India. He has worked and written on trade unions, industrial relations, and is presently fascinated with ethics, political sociology, and philosophy. vjanardhan.a@gmail.com)


‘Basic income’ has had a relation with capital-ism historically which would come as a surprise to many. Of course, it was not termed as ‘basic income’ until recently but the notion and purpose have been the same.  While terminology underwent a change in one, the system itself kept changing in the case of the other. Except for extreme tendencies of opinion, the mainstream for one would concede that capital-ism has played a historic role; even Marx would so concede. Thus the system has stood the test of time, has been the main driver of the modernity project and  will continue for an indefinite period. This is so notwithstanding the doomsday prophets, the latest being the environmental totalitarians. But this does not mean that one is being oblivious to ecology and its concerns. Indeed it will be organized capitalism that will adequately address the ecological question ultimately.  

At all times historically, enlightened capitalists and their managerial cadres concerned themselves with ‘basic income’. Arguably, they made life easier, the world a better place to live in, and capital-ism sustainable thereby. The triumph of capital-ism, among other things, has been due to its ingenuity and its capacity to reinvent itself. While its detractors always saw in every crisis of capitalism the imminent demise of the system, capital and its agents saw in every crisis a challenge to engage and overcome.

Henry Ford was one of the foremost of entrepreneurs to discern the crucial connection between production and consumption. He realized that the same workforce that made commodities inside the factory consumed them outside. The product therefore had to be within the reach of an average worker-consumer. That could only happen if the worker had a guaranteed wage at all times. He would then not only afford buying the product, the latter’s stock would also move out of the warehouses making fresh rounds of production feasible. Thus came into being the ‘Five-Dollar Day’. Fordism, as the system came to be known, had as one of its main pillars the institutionalization of a ‘basic income’ which workers took home every day.

Income generation was an important aspect of Keynesianism.  It was a method to bail out capital-ism.  The state made heavy investments in the economy thereby generating employment … and incomes! By restoring purchasing power and empowering the consumer, the state restored dynamism to the system. Not only did capitalism get a reprieve, the citizenry too was spared much misery. The theme-song of capital seems to be a’la Raj Kapoor’s melody: Tumhaare bhi Jai Jai/ Hamare bhi jai jai/ Naa tum haare, naa hum haare. There is agony in capitalism. There is also ecstasy.

Now the time has come when the state can directly empower those citizens who otherwise do not figure in ‘effective demand’ because of lack of purchasing power. The direct empowerment would be through the disbursal of a ‘basic income’. In any case this would become inevitable in industrial and post-industrial societies as increasingly jobs get eliminated and more and more workforces get redundant. While the apocalyptic would dream of radical visions, the practical would get to work and see how suffering can be mitigated. ‘Basic income’ shows the way out.

‘Basic income’ can outlive even the capital-ism as we know it today. It is thus a stand-alone and an absolute concept/idea. Presently as global capital-ism creates a world subject to constant economic change, the idea and practice of basic income can ensure stability. One is today interested in a win-win situation where an out-of-work worker can still exist as a human being rather than in the ‘collapse’ of the existing and the bringing in of a fantasy. Ultimately, basic income is a sine qua non in any social system, and its provision an important imperative of capital and the state singly and jointly.

Sarath Davala


To address this question, we need to examine the Indian social protection system as it exists today, and see what the issues and problems are. In the first place, compared to several of the Asian countries, India spends much less on social protection.  It spends about 1.7 percent of its GDP. Compare this with 5.4 % by China and nearly 9 % by South Korea and 19.4% by Japan!  

However, in relative terms, in the last 15 years, due to high rate of growth, the net amount allocated and spent by the Indian government on welfare has increased several fold.  On what does Indian government spend its welfare money?

The two main flagship programs that swallow bulk of India’s social spending are:

1. Targeted Public Distribution System (PDS): PDS is a system of transferring food grains such as rice, wheat, sugar, etc., items to eligible poor families. The total food subsidy that the Indian budget for 2015-16 has earmarked is Rs. 1,24 trillion rupees. Which is nearly 20 billion US dollars. The allocation for the consumer alone, i.e., to implement the National Food Security Act is Rs. 650 billion ($ 10.24 billion). 

2. National Rural Employment Guarantee Act (NREGA) – This is an Act of Parliament that provides, as a matter of right, 100 days of guaranteed employment to each rural household. The budget allocation for the financial year 2014-15 was Rs. 396 billion which is about $ 6.24 billion.

Then come the other programs such as mid-day meals in schools, old age and disabled pensions, scholarship, etc. These are well-meaning programs, but the biggest problem with them is that the benefit does not reach the intended population effectively and efficiently. Let us take the example of the PDS which is the single largest chunk of money in India’s social spending.

There are three types of issues that plague the PDS system.

1. Design Problems: The fact that the Government of India (GOI) has undertaken to procure, store and distribute food grains through Food Corporation of India (FCI) across the country is seriously flawed. The Shanta Kumar High level Committee appointed by GOI which submitted its report (January 2015) on restructuring FCI estimates that nearly 47 percent of the food grains from the PDS system leak or get diverted to the black market.[1]. Economists who support the PDS system dispute this figure and, ironically, reduce the leakage to 42 percent[2]. Secondly and equally importantly, the administrative cost of delivering the food grain is also unacceptably high. According to a Planning Commission study (2005), India spends about Rs. 3.65 to deliver one rupee of welfare to the poor.[3] There perhaps cannot be a more dismal picture than this.    

2. Definitional Problems: By design, all Indian welfare assistance schemes are conditional. The question is who the government thinks deserves welfare assistance. The GOI from time to time defines what is called  the ‘poverty line’. According to Rangarajan Committee (2014) which is by far the latest definition, in the rural areas, a person is defined as poor if she is earning Rs. 32, i.e., roughly half a US dollar. By this definition, about one third of the Indian rural population is poor. This is ascertained though periodic surveys. The biggest problem is not defining the poverty line, but ascertaining who actually earns below this amount. The surveys undertaken by governments are riddled with problems, and a large population that ought to be receiving welfare is left out. And those that should not be receiving actually receive. The NC Saxena Committee on reexamining the methodology followed in poverty estimates severely criticizes the current methodologies employed[4].

3. Delivery problems: As the saying goes, ‘there’s many a slip between cup and the lip’. Quite apart from the fact that the administrative costs are ridiculously high, there are two additional problems at the delivery end. One, the discretion that lies with the agent who runs the ‘ration shop’ and how that is misused. He could give less quantity or he could also open the shop at a time most inconvenient to the workers. Either workers may  decide not to go to work and thus forgo their wages, or simply lose the subsidised food grains. Further, there could be a government order that recipients should pick up grains for three months or six months at once (in monsoon season due to logistic reasons). If the recipients do not have cash to pick up their quota, they stand to lose it. Second, the poor quality of the grains that are delivered severely undermine and erode the value of the subsidy, in terms of the time spent in cleaning it, and the loss of some part of the total quantity.

Having reviewed an example of the existing social protection system in India, two issues we need to ponder. 
1. Can we reduce our understanding of poverty just to food or lack of it? Is poverty just about not having enough food? 
2. By giving 35 kilograms of wheat or rice per family per month, which going by the above discussion one is not sure if it reaches the intended households, can we arrogate to ourselves that we are addressing poverty ? Is that all it takes to remove  poverty?

It is against this backdrop that we need to see the relevance of Basic Income in India.
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[1]http://www.fci.gov.in/app/webroot/upload/News/Report%20of%20the%20High%20Level%20Committee%20on%20Reorienting%20the%20Role%20and%20Restructuring%20of%20FCI_English_1.pdf
[2] http://www.thehindu.com/news/national/economists-dispute-govt-claims-on-pds-leakage/article6853563.ece
[3] http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf
[4] http://www.thehindu.com/opinion/lead/poverty-estimates-vs-food-entitlements/article112226.ece

Sarath Davala


There are several terms that are in currency now in the Indian discussion. ‘Cash Transfers’, Direct Benefit Transfer’, ‘Basic Income’, and so on.  

Cash Transfers
Cash transfers simply means transfer of cash. However, in the development sector the meaning is a bit more loaded. It refers to welfare assistance usually provided by any government to a particular group of people or a section of the society. It also means transfer of cash as opposed to transfer of goods or services. For instance, instead of directly disbursing subsidised fuel or food grains, the government may decide to transfer equivalent value in cash so that the recipient may purchase the goods in the open market. In terms of effectiveness, there are arguments both in favour of and against cash transfers.
 
Direct Benefit Transfer
Direct Benefit Transfer (DBT) is an initiative taken by the Congress government in 2013 to make the transfer of welfare benefits to the recipients transparent and more efficient. The purpose of DBT as defined by Government of India (GOI) is as follows: 

“The purpose of Direct Benefit Transfer is to ensure that benefits go to individuals' bank accounts electronically, minimising tiers involved in fund flow thereby reducing delay in payment, ensuring accurate targeting of the beneficiary and curbing pilferage and duplication.[1]” 

DBT has been implemented in stages across the country for a variety of welfare schemes. However, it has seen major success in the case of the LPG (Liquid Petroleum Gas) subsidy which is the subsidised cooking gas for domestic use. Prior to introducing DBT scheme, government used to provide subsidy directly to the oil companies, and in turn they would sell cooking gas to consumers at the subsidised price. The scheme, introduced in 2013 by GOI, stipulated that the companies sell gas to consumers at market price, and the government will directly transfer the subsidy to the bank account of the consumer. By means of DBT, the government has been able to save nearly Rs. 12,000 crores, i.e., about 1.9 billion US dollars. This is quite a substantial savings for the government.

The following table shows the volume of Indian government’s subsidy bill for the financial year 2014-15. Government sees DBT as a method by which it can save billions of rupees without affecting the end-beneficiary, and perhaps even benefiting them by means of eliminating the pilferage and corruption.

Recently, at a roundtable on “Direct Benefit and Basic Income Transfers” organised by the International Centre for Human Development in New Delhi, the Chief Economic Advisor to Government of India, Mr. Arvind Subramanian said:  ‘By moving from a regime of subsidies to transfers, you liberate the market system to work more efficiently.’ According to him, the DBT scheme will allow the transfer of benefits in a leakage-proof, targeted and cashless mode. ‘It is above all a way of improving the life of the vulnerable and the poor.’[2]

DBT however requires a robust banking infrastructure and hundred percent financial inclusion. The LPG could succeed to such an extent primarily because bulk of the LPG consumers are urban-based.  

Basic Income
Basic Income however is different. The term comes more from a rights perspective. Those who advocate Basic Income contend that every individual in the society must be entitled to a basic income so that he / she can access the basic material requirements of life. This income should be given to all citizens without any work requirement or means test. In other words, by definition,  basic income should be given unconditionally. Other terms that are used which are similar to basic income are: Citizens’ Dividend, Guaranteed Minimum Income, Basic Income Guarantee, Unconditional Cash Transfer, and so on. More on these copncepts later.

The point is that Basic Income is indeed different from Direct Benefit Transfer. DBT is a solution concerning delivery alone. The system unclogs the pipes that deliver welfare benefits to the poor. The infrastructure that DBT provides is an excellent first step towards introducing Basic Income in future.     

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[1]  http://www.dbtmis.planningcommission.nic.in/dbtentry/homepage.aspx
[2]http://www.financialexpress.com/article/economy/direct-benefit-transfer-a-game-changer-arvind-subramanian/93607/

Sarath Davala




Basic Income is an income that is paid by the government unconditionally to all its citizens. It is paid monthly to every individual irrespective of their social and economic status, i.e., without any means test or work requirement. The basic principle behind is that every citizen is entitled to a basic income, as a matter of right, so as to meet her basic material requirements of life.

The key words in this definition are: unconditional, individual, monthly payment,  universal. In its pure form, Basic Income should have all the four elements. 

Why Unconditional?
Conditionalities, as they are generally called, usually  accompany any welfare giving by the state. That is, in order to receive welfare assistance, whether it is in terms of cash or kind (food grains or other goods), the recipient has to first of all prove that he / she is eligible, and thereafter provide evidence that the assistance given is being used for the purpose for which it is meant. These conditionalities give discretion to the muscle-end of the bureaucracy, which inevitably leads to corruption. This results in what are called ‘inclusion errors’ and ‘exclusion errors’.  The inclusion errors refers to a situation wherein those who should not be in the receiving group manage to enter it, and the exclusion errors refer to a situation where those who should be present in the receiving group are excluded. The idea of making basic income unconditional is primarily to overcome these errors. 

Why Individual?
Basic Income is an entitlement to an individual, be it a child or an adult. It grants economic citizenship to each and every individual in the country, and recognises that person as an active member of the economy - contributing to it, and therefore having a right to partake in the proceeds of the economy.

Why Monthly Payments?
Monthly payments are perhaps the real cutting edge of basic income. A monthly income provides the recipient a future orientation and a sense of security and purpose. Basic income necessarily has to be a monthly income.

Why Universal?
Basic Income should be universal because the entitlement comes to each individual in his / her capacity as a citizen. In principle, it is an affirmation of citizenship and a basis for solidarity.