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LATEST NEWS UPDATES | Not BPL but Basic Income by Meghnad Desai

Not BPL but Basic Income by Meghnad Desai

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published Published on Nov 4, 2011   modified Modified on Nov 4, 2011

The fracas over R32 per day was amusing and sad. Obviously, none of the journalists and politicians had known that the level used to be even lower in previous years. In 2004-05, the level was R552 per person per month for an urban person and R363 for rural. So, that is about R17.5 (R12) per day. The stylised anger only revealed that India’s elite may protest about poverty but they know little about how the poor live. This is particularly sad because India has been a pioneer in poverty studies. After all, it was Dadabhai Naoroji who first raised the issue about poverty in his classic work Poverty and Un-British Rule in India.
 
When the Planning Commission began drawing up its schemes in the 1950s, poverty reduction was never explicitly the objective. Planning was meant to make India self-sufficient in capital goods industries and eventually all manufacturing. The hidden objective was to be able to make our own defence equipment. And, in that respect, India was a success story, since by 1974 there was a locally made nuclear device.

Yet it was in the early 1970s that the debate opened up on poverty. Professors Dandekar and Rath pioneered poverty calculations based on a level of R15 per month. When the NSS took over, there was a systematic level based on calorie requirements. Then you calculate the cost of the food basket that would guarantee that level of calories. Engel curve studies had revealed that the poor spent a higher proportion, say 50%, on food than the average. So you boosted up the food cost by the reciprocal of the proportion (2) and you have a poverty measure.

Suppose we ask a different question. What is an adequate level of living that India can afford to give each of its citizens? This is perhaps implicit in the anger with which some people saw the R32 number. Even if one could live on that, what kind of living would that be? What about healthcare and what about school fees for children? Is there some level of income below which we believe no fellow citizen should fall? This is the idea of Citizen’s Income or Basic Income, which is much more radical than that of poverty level. It treats income on par with voting rights as an unconditional universal entitlement which a country must afford to give its citizens. But, of course, it has to be affordable. Let me do some crude calculations.

With a per capita income of around R60,000 ($1200), majority would be earning below that since incomes are unequally distributed. Now the data indicate that the bottom 50% have about 25% of the income. I make that roughly and a bit generously as around R7,500. (Income per adult would, of course, be higher, let’s say R15,000, taking children as half the population.) Thus R32 per day for 365 days (R11,680) is not too far below the median income. At the bottom the poor are tightly together.

No one can say that the bottom 50% has an adequate standard of living. How much higher should it be? What proportion of per capita income is adequate? It cannot be equal to the per capita income as that would require real Communism. So, the Basic Income has to be some proportion of per capita income. How much? If the median is roughly an eighth of the mean (which is a very high level of income inequality), how far can we afford to go?

This is what I believe we should be discussing. There is a Basic Income Earth Network (BIEN), which discusses this issue around the world. Ireland has a form of Basic Income as does the American state Alaska (thanks to its natural gas). The idea of social security does not quite match up to this because we want everyone, rich or poor, to have it. For example, the minimum threshold below which income tax does not apply is a sort of notion that the taxman thinks everyone who has income above that level should have a minimum non-taxed income. Should everyone have that level guaranteed?

Let’s say that the standard should be that every citizen should have at least a third of per capita income. That would make it R20,000, or R400 per week. This income level would be assigned to every citizen whether working or not, man or woman (or transgender for that matter). Some people could take it as a deduction against their tax liability. For those whose income falls below that level, there would have to be a cash transfer.

Can the Planning Commission get to work on that please?

The author is a prominent economist and Labour peer

The Financial Express, 10 October, 2011, http://www.financialexpress.com/news/column-not-bpl-but-basic-income/857893/0


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