On the world’s largest and longest UBI experiment

There is too much of speculation over what the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi would declare as a deal for the rural India, currently reeling under a deep economic crisis. Farmers are the definite target of such a deal if it is to be declared. With a blanket farmers’ loan waiver being now ruled out, what it would be the most pertinent question.

Just before leaving for a medical check-up in the United States, Union Finance Minister Arun Jaitley apparently has already finalised a “deal” to be “declared”. And it is tentatively a Universal Basic Income (UIB) kind of deal that will include a monetary support component for farmers and also an assured income support to others.

According to analysts, farmers are not that enthused with a loan waiver. Rather the demand has been to ensure income by ensuring right price for their produces. On the other hand, there is a slump in income of vast rural population.

According to Reserve Bank of India, since November 2014 rural wage has recorded only negative growth. This means people don’t have enough earning to spend and this one way also reflects in the constantly dipping food inflation. So, a direct and tangible income help would be a perfect “deal”. This fuels the speculation for UBI kind of scheme to be declared.

Down To Earth recently reported this as one of the major declarations to be made. It wrote: “This idea has been making rounds of the capital’s power corridors, and currently being talked about as something “new” and “politically lucrative”. The NITI Aayog has already floated the idea, highlighting its pros and cons. In the last four years, various government documents, including budget papers, have found strong reasoning for this idea.”

But, the world is replete with many such experiments with mixed results. Which one to get inspired by and which one to reject is a tough call to make. Currently, however, UBI is a global obsession with development economists and donors. One of such experiment is being done in Kenya, touted as the world’s largest and longest experiment with UBI that would fetch crucial lessons for such scheme.

Kenya’s experiment

The experiment covering 20,000 recipients in 200 rural areas (villages are usually “sequestered” for visitors) offers each of them a guaranteed basic income of 2,271.50 Kenyan shillings per month, or $22 for the next 12 years. It is in its third year of implementation, and would continue for the next nine years.

It is supported by the US-based non-profit GiveDirectly, and is being steered and monitored by a group of renowned development economists such as Abhijit Banerjee of Massachusetts Institute of Technology and Alan Krueger, a former Chairman of President Obama's Council of Economic Advisers and a professor at Princeton.

The design and the amount has been carefully finalised keeping in mind the country’s overall income status. For example, a Kenyan adult sustains on less than $2, or 206.50 Kenyan Shillings, per day. The income assured under this experiment means a boost of income by 50 per cent (for a two-parent household). The money is being directly transferred to the beneficiary’s account and they are intimated through a mobile phone alert.

The experiment aims to examine many of the concerns over UBI like whether it leads to abuse of the unconditional monetary assistance for alcohol and other vices or whether assured income will lead to people not taking of any jobs. To examine these concerns, the beneficiary villages will be compared with another set of 100 villages that are not covered under this scheme.

It is expected by this year that the experiment would fetch results on whether the assured income would have immediate changes in short-term decisions and welfare.

But findings from a village in western Kenya, where the experiment was piloted with 100 beneficiaries since October 2016, indicate not much negative impacts in short-term. This village will continue to be covered under the 12-year experiment.

First, 95 per cent of the beneficiaries have reported that they continued to work more or same as before. This debunks the surmise that assured income would lead to people preferring not to work thus setting in a “lazy” work culture.

Also, many reported that the extra assured income led to more expenditure on productive assets that boosted existing occupation. For example, many bought fishing net and many even set aside a part of it for saving purpose thus creating financial security.

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