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/lp/de-gruyter/the-iniquity-of-money-metric-poverty-in-india-zb7tkNk8vc
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- de Gruyter
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- © 2017 Walter de Gruyter GmbH, Berlin/Boston
- ISSN
- 1932-0183
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- 1932-0183
- DOI
- 10.1515/bis-2016-0005
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- See Article on Publisher Site
Abstract
1IntroductionThere appears to be a general consensus amongst experts that India’s development record in the last couple of decades or so has been marked by three salient features: high rates of growth in per capita income; no appreciable increase in inequality in the distribution of consumption expenditure, with the accompanying benign implication of a relatively inclusive growth regime; and a significant and steady decline in money-metric poverty as reflected in the time-trend of the headcount ratio of deprivation. The growth and poverty-reduction claims are easier to accept than the claim of ‘inclusive growth’, which can be shown to be based on altogether less secure foundations. These issues have been addressed in a sequence of papers by the present authors (Jayaraj & Subramanian, 2012, 2013; Subramanian & Jayaraj, 2012, 2013a, b, 2015a; Subramanian & Jayaraj, 2016).The paper, in part, will draw unavoidably on some of the authors’ earlier work. We begin, in Section 2, with a critical review of the standard ‘poverty-line’ approach to assessing money-metric poverty in India, which we argue is logically flawed, open to manipulation, and disposed to seriously understating poverty.In Section 3, we discuss a view of money-metric poverty which sees command over income as a desirable end in itself, rather than only contingently as a means to the end of avoiding deprivation in the space of human functionings. In this connection, we discuss the merits of a money-metric poverty indicator which Basu (2001, 2006) has called the ‘quintile income statistic’, and which throws light on aspects of both deprivation and disparity.It is perhaps important to explain here that we do not argue against the utility of a money-metric conception of poverty, as such. Rather, our objection is to the standard ‘identification-cum-aggregation’ approach to measurement, in which the difficulty of determining the appropriate space in which to postulate invariance of the poverty norm is frequently glossed over in favour of simplistic and misleading procedures for identifying the poverty line. A logically more appropriate indicator of money-metric poverty, we argue, is one which focuses direct attention on the absolute lowness (or otherwise) of the incomes of the poorest sections of a society. Such an indicator, as earlier mentioned, is the ‘quintile income statistic’, or some appropriate variant thereof. This indicator is simple to understand, not easy to manipulate, lends itself to application in the measurement of both poverty and dynamic inequality, and leads somewhat naturally up to a partial but definite case for the importance, as a welfare measure, of universal discretionary command over some minimum level of income.This paves the way, in Section 4, for some general considerations relating to the merits of a Universal Basic Income (UBI), and to a discussion of the somewhat polarized debate in the literature between proponents and opponents of UBI. We clarify that the notion of a basic income guarantee which we advance is one which sees it as a supplement to, rather than replacement for, other extant welfare measures; and one, furthermore, which does not call into question the necessity of reforming these other welfare measures (such as the public distribution system).In Section 5, the injustice of the co-existence of deepening inequality with poorly redeemed poverty is underlined, as is the justice of some elementary effort at poverty alleviation through redistribution. A propos, we examine some simple mathematics of drawing on the unaccounted economy and of re-directing elements of public spending from concessions and exemptions for the rich to guaranteeing basic income for the poor. We also provide an illustrative example, for India, of a negative income-tax schedule of the type advanced by Tobin (1966), in the cause of an unconditional cash transfer scheme aimed at ensuring a guaranteed basic income to every citizen of the country. Section 6 concludes.Some of the limitations of this paper need emphasizing. We have been led to the welfare-related appeal of a basic universal income, and of direct redistributive income-taxation as a means to this end, from our own long prior preoccupation with issues pertaining to the conceptualization and measurement of poverty. It is this latter perspective, rather than any remote expertise in the nuances of basic income studies or public finance, which presides over this paper. What we advance is the beginning of an idea—not anything like a detailed road-map to implementation and delivery. It is an aspect of one approach to what might, in principle, be done to alleviate money-metric poverty; and not a blue-print to that end. We hope that others, more qualified than we, might see some merit in the ideas we discuss, and provide more detailed and practical guidelines to execution.2Money-metric poverty in the ‘poverty line’ approach2.1IntroductionIn this section we review certain aspects of the conventional approach to the measurement of money-metric poverty which we believe are logically flawed, or arbitrary, or misleading, or superfluous, or vulnerable to manipulation. The cumulative impact of these inadequacies is to distract attention from the notion that money-metric poverty must, in some direct sense, concern itself with the absolute lowness of the incomes of those who are income-poor.2.2Theory and practiceThe measurement procedure most widely resorted to in assessing money-metric poverty is what one may describe as the ‘identification-cum-aggregation’ procedure. This consists in first identifying the poor by reference to a threshold level of income called the poverty line, and then aggregating information on the poverty line and the distribution of incomes into a numerical representation of poverty, such as, typically, the headcount ratio of poverty. Underlying this procedure is a view of income as a means to an end: the poverty line, in this perspective, is (or should be) the amount of income needed in order to avoid deprivation in respect of the attainment of minimally satisfactory levels of certain states of being and doing—such as nutrition, shelter, knowledge and mobility—which Amartya Sen (1985) called elementary human functionings.For reasons of both individual and environmental or ‘contextual’ heterogeneities, one should expect that there will be inter-personal variations in the ability to convert income (or resources, more broadly) into functionings. This is why a unique money-metric poverty line, which negates these heterogeneities, must be seen to be seriously misconceived. More generally, when one adopts the language of a ‘poverty line’, one implicitly endorses (or should endorse) invariance of the poverty standard in the space of functionings, not resources. This is what led Amartya Sen (1983) to the formulation that poverty is sensibly seen as an absolute concept in the space of functionings, but (because of inter-personal variations in the conversion rates of resources into functionings) as a relative concept in the space of incomes (or resources in general). Having said this, one must still ask: even if one gets the accounting related to a ‘functionings-mediated’ costing of the poverty line (or ‘regime-specific’ poverty lines) right, why not measure deprivation directly in the space of functionings by employing any of a number of ‘multi-dimensional’ measures of poverty now available in the literature?The World Bank, in terms of its ‘dollar-a-day’ poverty line, endorses invariance of the poverty norm in the space of real incomes (that is, income adjusted only for price variations), while official Indian approaches to the poverty line have endorsed invariance of the poverty norm in the space of commodity bundles. The poverty line approach to measuring poverty has thus tended to reflect a somewhat incoherent tension between theory and practice: in principle, the poverty line is supposed to be a means in the space of income to achieve the end of avoiding deprivation in the space of functionings; in fact, it has been employed as an (often arbitrarily specified) end in itself. This is a compromise of both language and logic. A conceptually and practically more attractive alternative, as we shall see later, might be to focus measurement and assessment directly on the absolute lowness of the income-poorest sections of a population.2.3The poverty line in India: An additional complicationThe Reports of three Expert Groups appointed by the Union Planning Commission under the Chairmanships, respectively, of D. T. Lakdawala (Planning Commission, 1993), S. D. Tendulkar (Planning Commission, 2009), and C. Rangarajan (Planning Commission, 2014) have advocated that the poverty line should be fixed with reference to a nutritional norm after the following fashion. (We are dealing only with the conceptual essence of the prescribed methodology, not with specific complications of detail.) Assume, for specificity, that the norm is with respect to the consumption of calories (though the Tendulkar Expert Group claims, erroneously as it turns out, not to have anchored its poverty line in a nutritional norm, and the Rangarajan Expert Group employs norms relating to the consumption not only of calories but also of proteins and fats: for details, see Subramanian, 2011, 2014). At the basis of the methodology prescribed by these Expert Groups is a version of what in the literature is called the Food Energy Intake (FEI) procedure. The idea is to first estimate the relation, say by regression, between calorie consumption and consumer expenditure in some particular year designated as a reference year, employing data—such as are available in the Central Statistical Office’s consumption surveys—on the distribution of calorific consumption by expenditure size class. The poverty line in the base year is then taken to be the level of consumption expenditure at which the selected calorific norm is observed to be realized. The commodity bundle corresponding to this poverty line is designated as the poverty line commodity bundle. Effectively, the poverty line in any other year is obtained as the monetary equivalent of the poverty line commodity bundle valued at the prices relevant for the year in question.In the procedure just described, the choice of the ‘reference year’ is both arbitrary and crucial for the magnitudes and trends of poverty derived from the procedure. Typically, one might expect, as one moves forward in time, that consumer preferences will shift differentially in favour of non-food items of consumption (such as education, health, and transport) vis-à-vis food items. This would be compatible with over-time calorific consumption at the officially prescribed poverty lines progressively falling short of the stipulated nutritional norms. In the Indian context, this phenomenon has indeed been observed, and come to be called the ‘calorie drift’. Such a calorie drift implies, equivalently, that the (real) poverty line might be expected, over time, to lie further and further above the officially determined poverty line.It could be argued, of course, that poverty must be deemed to have unambiguously declined (irrespective of the precise poverty line employed) in the presence of what is called ‘first-order stochastic dominance’, as has been done in the Indian context by authors such as Dutta and Panda (2014) and Kotwal, Ramaswami, and Wadhwa (2011). Whether this argument is entirely convincing is briefly reviewed in Appendix A the relegation of the issue to an Appendix is because of the slightly technical nature of the argument involved.A further unreasonableness, in the Indian context, has been the lowness of the poverty line, to which we now turn.2.4On the lowness of official Indian poverty linesThe poverty line for rural India in 2011–12, at current prices, is of the order of about Rs. 650 per person per month according to the Lakdawala Expert Group (Planning Commission, 1993), around Rs. 816 according to the Tendulkar Expert Group (Planning Commission, 2009), and around Rs. 972 according to the Rangarajan Expert Group (Planning Commission, 2014). As we can see, the allowance for a decent standard of living made by each successive expert committee has increased over time. Even so, does even the most generous of these allowances approximate its intended interpretation of a level of income that permits a modest level of freedom from want?Recall that a reasonable interpretation of the term ‘poverty line’ is compatible with a requirement of the following type. One first lists a set of elementary human functionings in respect of which a person must attain minimally satisfactory levels of achievement in order to be deemed free of deprivation; one costs the attainment of each of these levels of functioning; and one adds up these costs in order to arrive at the poverty line. To what extent have official Indian proposals for the poverty line met this requirement? By way of an illustrative example, consider the Rangarajan Committee’s urban poverty line for the State of Tamil Nadu in 2011–12 at current prices: this works out to Rs. 1,380 per person per month. Employing the Consumer Price Index of Industrial Workers, one can ‘update’ this poverty line to its value at 2013–14 prices, which, very roughly, is Rs. 1,600, or Rs. 8,000 for a household of five. Confining ourselves to necessities relating to nutrition, shelter, education, and health, we have attempted, in what follows, to come up with a quick estimate of a monthly poverty line income for a household of five in 2014. This works out to about Rs. 14,000, far in excess of the official poverty line of Rs. 8,000.In working out a norm of adequacy (which is rudimentary, and avoids nuanced complications of detail), we have first attempted to work out the requirements in respect of food, as reflected in Tables 1A and 1B. (For a more complicated effort at identifying global levels of adequacy, the reader is referred to the work of Moatsos, 2015.) The estimates in Table 1A have been adapted from the low cost ‘Indian Vegetarian Balanced Diet’ and the sample menu for an adult male engaged in moderate activity, as furnished in Nutrient Requirements and Recommended Dietary Allowances for Indians: A Report of the Expert Group of the Indian Council of Medical Research, 2009 (National Institute of Nutrition, Indian Council of Medical Research Hyderabad, India). Our estimates also include a provision for meat. Table 1B costs ingredients which are commonly employed in the Tamil cuisine. Table 1C provides estimates of the cost of non-food commodities and services based on the presumed indispensability of requirements relating to shelter, education, energy, healthcare, transport and communication, clothing and footwear, entertainment and socialization, and personal hygiene. Table 1D summarizes the substance of Tables 1A, 1B and 1C, and presents the aggregate of food and non-food requirements, in terms of a consolidated poverty line. The Tables are self-explanatory, and do not require much in the way of amplification. They are also transparent, and so open to easy agreement or refutation, as the case may be. The effort here has been to provide a simple illustration of a money-metric poverty line based on a rudimentary Capability-cum-Basic-Needs approach. An un-extravagant assessment of the basic necessities of life yields a poverty line for a household of five which exceeds the Rangarajan Committee poverty line by a factor of about 1.75.Tables 1A, 1B, 1C and 1D:Estimating a monthly poverty line for a family of five in Urban Tamil Nadu: 2014.1A: Costing of main diet for a family of five per monthItemDaily allowance of various items per person (in gms/ml)Quantity required for a family of five per month (in Kgs)Quantity purchased from PDS (in Kgs)Unit price in PDSTotal value of purchase in PDSQuantity purchased in open marketUnit price in open marketTotal value of purchase in open marketTotal monthly expenditure (Rupees)Rice425.0063.7520.000.000.0043.7530.001312.501312.50Pulses32.004.802.0030.0060.002.8080.00224.00284.00Oil/Fats32.004.801.0025.0025.003.8078.00296.40321.40Milk150.0022.500.000.000.0022.5044.00990.00990.00Vegetables75.0011.250.000.000.0011.2520.00225.00225.00Leafy Vegetables40.006.000.000.000.006.0025.00150.00150.00Fruits50.007.500.000.000.007.5050.00375.00375.00Roots and Tubers40.006.000.000.000.006.0030.00180.00180.00Sugar25.003.752.0013.5027.001.7535.0061.2588.25Meat30.004.500.000.000.004.50180.00810.00810.00Sub-Total 1 (Rounded off)4736.001B: Costing of ingredients commonly used for cooking in Tamil Nadu for a family of five per monthItemQuantity used per monthValue (in Rupees)Red Chillies250 gm25.00Dry Coriander500 gm50.00Green Chillies250 gm12.50Garlic250 gms20.00Ginger100 gms10.00Onion7.5 Kgs225.00Tomatoes7.5 Kgs112.50Curry leaves, Coriander Leaves, Tamarind, etc.Rs. 3030.00Turmeric Powder50 gms10.00Cumin Seeds100 gms24.00Mustard50 gms10.00Sub-Total 2529.001C: Costing of non-food items required for a decent living for a family of five per monthItem of expenditureExpenditure per month (Rs)ShelterRent5000.00Advance to be Paid for Renting a House is at Rs. 30,000. Interest on Advance at the rate of 8 % is Rs. 2400 Per Annum and the Monthly Interest Forgone is Rs. 200.200.00EducationaTwo children in Government/Corporation School17.00EnergyElectricity250.00LPG for Cooking303.75HealthcarebTwo visits to a doctor @Rs. 50 per visit100.00Transport and CommunicationCommuting300.00Postage/Phone60.00Clothing and FootwearClothing250.00Footwear62.50Entertainment and SocializationFilm250.00TV Viewing charges75.00Inviting Guests, Visiting People150.00Personal HygieneBathing Soap100.00Tooth Paste60.00Hair Oil70.00Dish Washer Detergent20.00Soap for Washing Clothes75.00Sub-Total 3 (Rounded Off)7343.001D: Consolidated poverty line for a family of five in Urban Tamil Nadu: 2014ItemRupees1. Food Requirements (Subtotals 1 and 2 from Tables 1A and 1b)52652. Non-Food Requirements (Sub-Total 3 from Table 1c)73433. Total Requirements (Food + Non-Food)126084. Add Contingencies: 10 % of Total Requirements12615. Total Value of Poverty Line (3 + 4)13,869 approximated to: 14,000Source: Authors’ Calculations.Note: ‘PDS’ stands for ‘Public Distribution System’.aFor estimating education expenses, we have assumed that a typical family has two children studying in a Government/Corporation school. If one of them should happen to be in an Arts and Science College, say in a Government/Aided institution, monthly expenses on education could easily add up to Rs. 500. For example, the annual fee charged in Presidency College for a Bachelor of Arts degree is Rs. 1245, and the examination fee per paper is Rs. 60. Assuming that in each semester a student appears for four papers, the exam fee per annum (two semesters in each year) works out to Rs. 480 (= Rs. 60*8). The fee for statement of marks per semester is Rs. 60, or Rs. 120 for two semesters in a year. The annual fee, fee for statement of marks, and the exam fee alone work out to Rs. 1845, or Rs. 154 per month. To this we need to add at least Rs. 10 per day toward purchase of books, pens, commuting expenses and pocket money.bWe have only allowed for two visits to a kindly doctor who charges just Rs. 50 per visit. Notice here that the private average per capita health and medical care expenditure per annum estimated from the National Accounts Statistics was of the order of Rs. 509 in 1998–99. These estimates are available in Kadekodi and Kulkarni (2006).A seriously under-stated poverty line can have certain unsavoury implications for interpretation and policy, which are outlined—for the specific case in which the poverty line actually exceeds the mean income of a society—in Appendix B.2.5SummaryThe idea of a Universal Basic Income is a helpful one even if it does not have to be seen as a stand-alone response to poverty (Haagh, 2007). The debate on the subject—despite a tendency toward polemics and away from a consideration of alternative aspects of policy and administration—has helped to focus attention on the inadequacy of a great deal of current anti-poverty policy. Much of such policy, including (in particular) the diagnosis underlying it, has to do with extant global approaches to the measurement and assessment of poverty, which have been inadequate as a basis for anti-poverty intervention, including Basic Income and other policies viewed together.In what follows, and in the light of the foregoing, we consider an approach to the quantification of money-metric poverty which is, arguably, less vulnerable to conceptual incoherence and the temptations of manipulation than has proved to be the case with the poverty line approach to the problem in India and elsewhere; and is also more directly and uncomplicatedly focused on income-poverty, as such, in terms of the income-performance of the poorest sections of a society.3Money-metric poverty in the ‘quintile income’ and related approaches3.1Review and rationaleThe difficulties with conventional poverty measurement reviewed in the preceding section are not peculiar to the Indian context. Rather, they are endemic to the ‘identification-cum-aggregation’ approach to the conceptualization and measurement of poverty. The problem of seeking invariance of the poverty norm in the space of ‘real incomes’ is common to the measurement protocols adopted by the Government of India, the US Federal Government, and the World Bank. The problem of specifying the poverty line without any particular regard for adequacy is common to both the official Indian procedure and the World Bank’s methodology. (On these issues, the reader is referred to Moatsos, 2015; Reddy & Pogge, 2010; Subramanian, 2015). Indeed, the $1.90 (in 2011 Purchasing Power Parity terms) International Poverty Line per person per day recommended by the World Bank, which the nations of the world have signed into as constituting an appropriate threshold for the purposes of formulating the ‘Poverty’ goal as one component of the Sustainable Development Goals, is a case in point. The Report of the World Bank-appointed Commission on Global Poverty under the Chairmanship of Tony Atkinson (Atkinson, 2016) was recently submitted. The remit of the Commission was two-fold (see Atkinson, 2016, pp. 1, 2): ‘(1) What should be the interpretation going forward of the definition of extreme poverty, set in 2015 at 1.90 PPP-adjusted dollars a day per person in 2015, in real terms? (2) What choices should the World Bank make regarding complementary poverty measures to be tracked and made available to policy makers?’ It is instructive that the Commission’s Report carefully and politely distances itself from commenting on the persuasiveness of the World Bank’s $1.90 International Poverty Line (Atkinson, 2016, pp. 3, 13, 14):In chapter 1 of the Commission Report, the World Bank extreme poverty definition is taken as a "governmental standard." It reflects a political judgment about the extent of ambition on the part of the Member States of the United Nations: the members of the UN have signed up to this particular poverty target. An alternative poverty line may be more intrinsically defensible, but it does not have the same claim on political leaders. Chapter 1 is therefore concerned with the implementation of the $1.90 standard, taking it as a given … Chapter 2 of the Report steps back and asks more generally how In October 2015, the World Bank published a new set of extreme poverty estimates … The 2015 estimates … set a new International Poverty Line at $1.90 PPP-adjusted a day per person. This section is devoted to an explanation of the main changes. Its aim is expository … It should be stressed that the section is purely descriptive. The Commission was not asked to evaluate the procedures by which the World Bank arrived at the October 2015 estimates [emphases added].It is further instructive that the World Bank (2016) rejected one particular recommendation in the Commission’s Report that constitutes a crucial component of the present paper. The recommendation in question is Recommendation 17 (Atkinson, 2016, p. xxi): ‘The indicator for the shared prosperity goal should be unambiguously stated as raising the living standards of the bottom 40 % in each country (not confounded with their relative share), and extended to include an indicator identifying the growth of per capita real consumption of the bottom 40 % of the world distribution of consumption.’We have argued in Section 2 that the language of a money-metric ‘poverty line’ ought to connote a resource-based threshold which is derived from a capability–, or functioning–, based perspective of deprivation. However, as long as we are clear about our intentions (without resorting to ‘Humpty-Dumptyism’ in the use of language), it is legitimate—and indeed probably more intrinsically and directly persuasive—to reckon money-metric poverty by viewing income as an end in itself, rather than only contingently as a means to the end of avoiding deprivation in functionings space. In this view, money-metric poverty is simply a matter of the lowness of income: the lower one’s income, the greater one’s level of income poverty. Money-metric poverty, that is, can be deduced by appraising the income status of the income-poorest section of any population. It is in line with this understanding that one advances Kaushik Basu’s (2001, 2006, 2013In Basu (2013), the threshold has been raised: The reference is to the average income of the poorest 40 % of the population, and the statistic is referred to as an indicator of‘shared prosperity’. Neither the revised cut-off nor the sanitized re-naming is particularly attractive—and no doubt both reflect the conservatism of the World Bank—though it is a sign of some easing up on its part that it now seems prepared to see increases in the average income of the poorest 40 % (and not just of the poorest 100 %) as a worthwhile goal.) ‘quintile income statistic’ as an indicator of money-metric poverty, pure and simple. The quintile income statistic is just the average income of the income-poorest 20 % of a population. It is what a philosopher might call a money-metric poverty indicator simpliciter (Subramanian & Jayaraj, 2015b).The quintile income statistic reflects the view that, other things equal, the higher the quintile income is, the lower is income-poverty. The crucial point, of course, is the ceteris paribus clause. The difficulty is that, on the ground, other things are seldom equal. This is one of the important reasons why income by itself is often regarded as a suspect indicator of deprivation or advantage. Having said this, it is useful to note that this stricture does not apply to income only. For example, one supposes that the level of calorie consumption is not hopelessly compromised as an indicator of nutritional status, or that one need not resist advocating higher levels of calorie intake, because in some particular instance the nutritional status of a person consuming higher levels of calories is worse, on account of want of access to clean drinking water, than that of a person consuming lower levels of calories who however does have access to clean potable water. Similarly, it is presumably easier to make something of one’s education when one is not hungry than when one is: this does not undermine the importance of the attainment of knowledge as a valued human functioning, or prevent one from associating higher levels of education with lower levels of knowledge-deprivation. Failing this, the conception of ‘satisfactory human functioning’ could tend to become more and more abstract and elusive of operational significance or identification, to the point almost of ending up as a metaphysical notion.The quintile income statistic as an indicator of money-metric poverty shares much in common with—in a different context—James Tobin’s differentiation of his position from Milton Friedman’s on the role of money in an economy: for the latter, according to Tobin, only money mattered, while for the former, money, too, mattered. Similarly, and for far too long, per capita income and its growth were advanced by the profession as the only worthwhile indicator of advantage or deprivation. This overwhelming emphasis on material resources, without any apparent consideration for ‘human capabilities’, was what led to Amartya Sen's (1985) development of an alternative paradigm of freedom and development in terms of the Capability Approach. It is arguable though that the project of the questioning of income as a wholly satisfactory indicator of well-being has succeeded not wisely, but too well! The back-lash from income as the only thing that matters in an account of human well-being to a position where it is altogether banished from consideration has sometimes been a regrettable over-reaction to a much-needed shift in emphasis in the discourse on development.Such a point of view is well captured in the following assessment of Tania Burchardt’s, (though of course we do not mean to suggest that this position is necessarily endorsed by the author (Burchardt, 2013, p. 3)): there are good reasons to think that GDP, and associated measures, are inadequate summaries of economic progress and would be enhanced by other, more comprehensive and direct, indicators of wellbeing … However, there is also a suspicion that the concurrence of the global financial crisis, occasioning dramatic falls in GDP and increases in unemployment, with the advent of policy makers’ enthusiasm for alternative, subjective, measures is more than just a coincidence. It would clearly be convenient in the current climate for governments to be able to claim that their populations were doing just fine, based on these new indicators, despite the parlous state of their economies.Indeed, discretionary command over a quantum of income could not only be seen as a valued human functioning, in and of itself, but as an outcome which is compatible with the pursuit of a measure of freedom in allocating one’s resources in line with one’s choices, and, presumably, independently of the paternalism of the State or of society (Guy Standing, 2013). Standing’s (2013, 2014, 2016) emphatic endorsement of a UBI (divorced from the question of whether it should replace or supplement other anti-poverty policies) gains considerable traction in this context. It is in this sense, and against the preceding background, that we advance Basu’s quintile income statistic and a variant of it as plausible indicators of money-metric poverty. The quintile income statistic, as we have seen, furnishes a particular way of appraising the income status of the income-poorest section of any population. The ‘income-poorest section’ (as well as the ‘income-richest section’) of a population can be determined by employing either quantiles (as in Basu’s indicator) or absolute numbers of the population as cut-offs. We seek, in what follows, to quantify such a view of poverty, specifying cut-offs in terms of both quintiles and population numbers, and employing time-series data on the distribution of consumption expenditure, in the Indian context.3.2Consumption expenditure status of the poorest and richest sections of the populationWhen we examine trends in the quintile income, we keep the proportion of the population which is covered fixed (at 20 %), though this would imply larger and larger absolute sizes of the population over time, in a regime of population growth. Under similar circumstances, keeping the absolute size of the population that is covered constant would entail describing smaller and smaller proportions of the population over time. We consider, in turn, both interpretations of the ‘poorest’ section of the population.First, drawing on Subramanian and Jayaraj (2015b), we present information on the quintile level of consumption expenditure for both rural and urban areas of the country in those years between 1983 and 2011–12 for which the ‘thick’ surveys of the National Sample Survey Office’s data on the distribution of consumption expenditure are available. (We omit the year 1999–2000 from consideration: the data for this round of the NSSO are suspect, for reasons that have been dealt with at length by Abhijit Sen, 2001.) It is easily discernible from the data provided in Table 2 that the quintile expenditure levels reflect acutely low standards of living. Our attempt at deriving a poverty line for urban Tamil Nadu in Section 2.3 is suggestive of the possibility that a monthly norm of adequacy for a family of five might be of the order of Rs. 14,000 for the country: in contrast, the average consumption expenditure for a family of five in the poorest quintile is just around Rs. 3,000 in the rural areas, and Rs. 4,200 in the urban areas of India in 2011–12—which itself reflects an improvement, in however weak a trend, over performance in earlier years.Table 2:The quintile expenditure in rupees at 1983–84 prices: India 1983 to 2011–12.YearAverage monthly expenditure of poorest 20 % (Rural India)Average monthly expenditure of poorest 20 % (Urban India)198347.5664.481987–8860.4279.581993–9463.0886.232004–0570.2189.162009–1077.3499.932011–1286.92113.19Source: Computations based on Unit Level Data, from Schedule 1, on Consumption Expenditure, available on CD-ROM, for the NSS, 38th, 43rd, 50th, 61st, 66th, and 68th Rounds, National Sample Survey Office, Government of India. Annual Average Consumer Price Indices of Agricultural Labourers (CPIAL) and Industrial Workers (CPIIW) are from: Reserve Bank of India (RBI) (2012–13): Handbook of Statistics on Indian Economy, Published by N. Senthil Kumar Director, Data Management and Dissemination Division Department of Statistics and Information Management, Reserve Bank of India C- 9/3rd Floor, Bandra-Kurla Complex, Post Box No. 8128, Bandra (E), Mumbai – 51.Note: The price deflators employed have been the Consumer Price Index of Agricultural Labourers (CPIAL) for rural India, and the Consumer Price Index of Industrial Workers (CPIIW) for urban India.Next, we consider the consumption expenditure status of the poorest 100 million and the richest 100 million in rural India, and that of the poorest 50 million and the richest 50 million in urban India. In the rural areas, the bottom 100 million and the top 100 million, respectively, are classified into five equal size-classes of 20 million each (Table 3A). In the urban areas, the bottom 50 million and the top 50 million, respectively, are again classified into five equal size classes of 10 million each (Table 3B). We thus obtain both a disaggregated and an aggregated picture of the poorest and the richest sections of the population. One can see from Tables 3A and 3B that, on aggregate, the poorest sections in both the rural and the urban areas fare best in the year 2011–12. The average consumption level of the richest 20 million among the poorest 100 million persons in the rural areas in 2011–12, at 1983–84 prices, is of the order of Rs. 91.98, which is just a little in excess of the rural quintile income of Rs. 86.92 in 2011–12 (Table 2). Similarly, the average consumption level of the richest 10 million among the poorest 50 million persons in the urban areas in 2011–12, at 1983–84 prices, is Rs. 129.47, not vastly in excess of the urban quintile income of Rs. 113.19 in 2011–12 (Table 2). We have already commented on the poor living standards reflected by the quintile income statistic in both rural and urban India. With the creamiest layers of the poorest sections of the population faring so poorly, the consumption status of poorer layers—such as that of the poorest 40 million in rural India or the poorest 20 million in urban India (and we are speaking now of populations the size of some European countries)—is seriously low, as the figures in Tables 3A and 3B reveal.Table 3:Mean consumption expenditure of poorest and richest persons in India.3A: Mean consumption expenditure in constant (1983–84 prices) of the poorest and richest 100 million persons: Rural India 1983 to 2011–12Classification of population into groups of 20 million each19831987–881993–942004–052009–102011–12Poorest 100 million populationPoorest25.9841.5243.9548.1452.3459.002nd Poorest43.4754.2456.6260.9666.1873.993rd Poorest50.3861.1663.0767.0173.0381.324th Poorest55.4766.3868.0371.7078.3486.745th Poorest59.9070.8972.4675.9582.8691.98Combined47.0458.8460.8364.7570.5578.61Richest 100 million population5th Richest150.44178.48181.74220.69246.65291.904th Richest165.06196.75198.57241.74269.89319.743rd Richest187.37222.37222.45274.84301.49359.872nd Richest225.26265.76262.67333.32358.56432.84Richest411.40478.40468.86674.67735.56909.67Combined227.91268.35266.86349.05382.43462.843B: Mean consumption expenditure in constant (1983–84 prices) of the poorest and richest 50 million persons: Urban India 1983 to 2011–12Classification of population into groups of 10 million Each19831987–881993–942004–052009–102011–12Poorest 50 million populationPoorest46.4060.5763.0362.5068.4776.982nd Poorest68.0380.8683.4681.3886.9296.153rd Poorest78.7992.7395.9292.0599.56108.374th Poorest89.00103.19105.96101.03109.46119.155th Poorest98.42113.62115.48109.59118.60129.47Combined76.1890.1990.6189.3196.60106.02Richest 50 million population5th Richest173.95220.08262.80338.11414.19484.594th Richest198.87250.76296.53378.01466.19547.353rd Richest235.00294.73343.49439.45540.65648.372nd Richest292.95366.30422.65549.98671.49837.84Richest516.51680.17754.361070.651449.091666.25Combined283.48362.41415.91555.24708.32836.88Source: see Table 2.Table 4 presents some aggregated data extracted from Tables 3A and 3B.Table 4:Some aggregate statistics on average monthly consumption levels in rupees, at 1983–84 prices, of the poorest and richest sections of the population in rural and Urban India: 1983 to 2011–12.Rural IndiaYearAverage consumption of poorest 100 millionAverage consumption of richest 100 millionRatio of richest-to-poorest groups’ average consumption levelsQuintile consumption level198347.04227.914.8547.561987–8858.84268.354.5660.421993–9460.83266.864.3763.082004–0564.75349.055.3970.212009–1070.55382.435.4277.342011–1278.61462.845.8986.92Urban IndiaYearAverage consumption of poorest 50 millionAverage consumption of richest 50 millionRatio of richest-to-poorest groups’ average consumption levelsQuintile consumption level198376.18283.483.7264.481987–8890.19362.414.0179.581993–9490.61415.914.5986.232004–0589.31555.246.2289.162009–1096.60708.327.3399.932011–12106.02836.887.89113.19Source: Based on figures in Tables 3A and 3B.We have already observed that the quintile consumption levels in both rural and urban India are seriously low. We find from Table 4 that in the rural areas, the average consumption of the poorest 100 million population is systematically lower than the quintile consumption level; in the urban areas, the average consumption of the poorest 50 million is not vastly different from the quintile consumption level: the one is higher than the other in the first 4 years of our time-series, and lower, in the last 2 years. The poorest sections of the population are seen to fare very poorly indeed in terms of an absolute consumption achievement. Using a national cut-off of Rs. 14,000 as a norm of adequacy for a household of five, we find that in 2011–12, a five-member family in the group of the richest 100 million in rural India would have had a household consumption level of about Rs. 18,000—just about one-and-a-quarter times the cut-off level. In urban India, a five-member family in the group of the richest 50 million would have had a household consumption level of about Rs. 31,000—around 2.2 times the cut-off level of Rs. 14,000. Thus, the richest sections of the population are themselves seen to be performing not very impressively from an absolute perspective in terms of achieved levels of consumption expenditure.Table 4 also indicates that the hiatus between the richest and poorest sections of the population, in terms of the ratio of the richest-to-poorest groups’ average consumption levels, is more muted in the rural than in the urban areas of the country. Indeed, in rural India, this ratio is roughly constant in the period 1983 to 1993–94, and then rises gradually in the period 2004–05 to 2011–12. In urban India, the rise is systematic right through: gradual in the period 1983 to 2004–05, and steep thereafter. Over the entire period from 1983 to 2011–12, in the rural areas, the average consumption level of the poorest 100 million has grown at an annual compound rate of 2.48 %, while the average consumption level of the richest 100 million has grown at 3.43 %. The corresponding figures for urban India (poorest 50 million and richest 50 million) are even starker, at 1.91 % and 3.94 % respectively: the poorest sections of the population have improved their condition more slowly, systematically, than the richest sections. It is instructive to divide our time-series into two periods: the ‘pre-liberalization’ period of 1983 to 1993–94, and the post-liberalization period from 2004–05 to 2011–12. It turns out that, in the rural areas, the average consumption of the poorest 100 million has grown more swiftly than that of the richest 100 million in the pre-liberalization period and that this trend is reversed in the post-liberalisaton period; in urban India, the average consumption of the richest 50 million has grown faster than that of the poorest 50 million in both periods, though the gap in growth rates is more pronounced in the post-liberalization phase. The relevant figures are provided in Table 5.Table 5:Growth rates (%) in average consumption of the poorest and richest sections of the population in the ‘Pre-Liberalization’ and ‘Post-Liberalization’ periods: Rural and Urban India, 1983 to 2011–12.Rural IndiaSection of populationAnnual compound growth rate from 1983 to 1993–94Annual compound growth rate from 2004–05 to 2011–12Annual compound growth rate from 1983 to 2011–12Poorest 100 million2.60 %3.29 %2.48 %Richest 100 million1.65 %4.82 %3.43 %Urban IndiaSection of populationAnnual compound growth rate from 1983 to 1993–94Annual compound growth rate from 2004–05 to 2011–12Annual compound growth rate from 1983 to 2011–12Poorest 50 million1.75 %2.90 %1.19 %Richest 50 million3.91 %7.08 %3.94 %Source: Computations based on Figures in Tables 3A and 3B.To conclude this section: if we take the achievement of a decent level of income or consumption as a valuable functioning in itself, then, by focusing attention on the consumption-poorest section of the population, we find that levels of consumption-deprivation are very high; that such deprivation has been relatively poorly served by the process of growth, notwithstanding the improvements in the latter registered in the post-liberalisation period; and that growth has been relatively more beneficial to the richer sections of the population, so that the phenomenon of money-metric poverty has been accompanied by growing money-metric inequality as well. This strongly suggests the need for something in the nature of an explicit income-redistribution remedy designed to shore up the faltering fortunes of the income-poorest sections of the population through the mechanism of a guaranteed basic income. This is not a conclusion that would be dictated by the conventional protocols of money-metric poverty measurement, which would typically present a picture of relatively low and temporally declining headcount ratios of poverty. To this issue of shoring up low incomes with guaranteed cash transfers we now turn.4Universal basic income and cash transfers: Some very elementary considerations4.1The case for a guaranteed minimum incomeAs the Introduction indicates, our own case for a guaranteed minimum income is based on certain perceived inadequacies of the dominant protocols of money-metric poverty measurement that inform the literature. This is a somewhat uncharacteristic route to justification, but arguably one which supplements rather than replaces more mainstream rationales for a guaranteed income that one finds in the literature. It would be repetitive and time-consuming to replicate all of these arguments here in detail, but for purposes of completeness and contextualization, a quick summary—which is of relevance to our particular concerns—might be in order, as well as a re-iteration of the basic proposition that ‘[i]t is necessary that people have choice and alternatives to be able to live with dignity. Therein lies the importance of the Citizen’s Basic Income’ (Suplicy, 2006, p. 59).The stratagem we adopt here is to review the case for, and the objections to the case against, a universal basic income (UBI) as these have been assessed in a very important recent book on the subject of a UBI for India by Davala et al. (2015). In the process, other contributions to the literature are also referred to. The case for UBI covers the following grounds. One, unlike means-tested transfers which tend to be paternalistic and charitable, UBI strengthens the notion of economic citizenship by stressing universalism, rights-based entitlements, social justice, autonomy in decision-making, and freedom (Standing, 2008; Young and Mulvale, 2009; and Reed & Lansley, 2016). Two, UBI limits bureaucrats’ discretionary power and the attendant corruption and clientelism which are so much a feature of targeted anti-poverty programmes (Manwu, 2015). Three, UBI is relatively efficient, as reflected, for example, in the low administrative costs of income transfers in Mexico (Davala et al., 2015; but for reservations on this view, see De Wispelaere & Stirton, 2011). Four, in contrast to targeted, conditional transfers, UBI is relatively more effective in reducing poverty and poverty-traps, by ensuring better knowledge and greater take-up of the benefits of the programme among the poor, and also greater participation in income-generating activities (van Hassan, 2016; Malul, Gal & Greenstein, 2009; Manwu, 2015; Parijs, 2005; Vuolo, 2013; Zelleke, 2011). Five, UBI promotes human development in a number of dimensions (Davala et al., 2015; Manwu, 2015), including health and nutrition outcomes.The many objections to UBI include the following. First, UBI is seen as a ‘smokescreen’ for dismantling all public welfare systems (Davala et al., 2015). However, the authors point out that many advocates of UBI are committed to strengthening existing programmes, and see UBI as one component of a larger welfare system (see also van Parijs, 2005; n.d; Mulvale, 2008; Reed & Lansley, 2016; Yong & Mulvale, 2009). We shall have more to say on this in Section 4.3. Second, UBI transfers are objected to as unjustifiable handouts. To this argument, Davala et al. (2015) provide two responses: at the philosophical level, one must question the justice of an arrangement in which ‘wealthy people obtain numerous benefits without being required to give something in return’ (p. 20), an outcome that might be corrected by a UBI when it is seen as what Thomas Paine called a social dividend on the investment of previous generations to which all are entitled; at the instrumental level, UBI deserves to be seen as a social investment (on which see also van Parijs, 2005). The third objection is an ‘incentive’-related one which views UBI as promoting ‘laziness’ and negatively impacting on the labour market participation of recipients. Galbraith's (1999) response argues for an acceptance of the reasonableness of allowing some leisure for the poor too. Apart from this, there is empirical evidence available against the proposition in both the village-level Indian case study provided in Davala et al. (2015) and in Manwu's (2015) work on Namibia. At the theoretical level, Groot and Peters (1997) advance a model which predicts that providing moderate basic income can lead to lower unemployment. The fourth objection is the claim that UBI will have leakages, to which Davala et al. (2015, p. 21) pose the counter that, to the contrary, ‘… direct cash transfers would reduce the number of steps required for the benefit to reach the recipient … [and] would considerably reduce the possibility of siphoning off funds into illegitimate hands’. The fifth objection calls the effectiveness of UBI into question in the presence of supply-side constraints. Citing case studies from Brazil and Namibia, Davala et al. (2015) argue that transfer schemes under UBI tend to create their own supplies.The foregoing quick summary suggests at the very least that it is possible to make a case for, as well as a case against the objections to, a Universal Basic Income. However, the summary is also mainly a quick recall of some of the standard arguments, on the side of UBI, that preside over the subject. A slightly more nuanced treatment of the problem would recognize a more context-specific approach to an assessment of the relative merits of targeted or in-kind assistance and UBI than often seems to inform the literature on the subject. This would also make for a case in favour of co-existence rather than mutual exclusiveness, an issue which we consider briefly in what follows. Our discussion will have a focus on India, where the dominant emphasis has been on cash transfers, as such, rather than on providing a Universal Basic Income. The subject of dispute has often been on the relative merits of transfers via cash, on the one hand, and different forms of assistance, on the other, such as in-kind transfers, subsidies and public works programmes.4.2On claims and counter-claimsAs we have seen, UBI (or more generally a universal cash transfer) is commonly advanced in contrast to targeted, conditional, means-tested grants (MTGs) in cash or in kind (the provision of subsidised food in fairprice shops to those that can be identified as poor being one example). MTGs are frequently justified on efficiency grounds (only the deserving receive the benefit) so that, when resources available for welfare assistance are limited (as is generally the case in developing countries), targeting is an efficient means of alleviating poverty. This view has been critically examined by, among others, Besley (1990), Besley and Kanbur (1990), Mkandawire (2005), and Standing (2008), and Lavalle, Oliver, Pasquuier-Doumer and Robilliard (2010). A major strand of the critique is one that counts the costs of targeting. Besley (1990) points out that means-tested programmes are typically characterised by administrative costs of identification and implementation, pecuniary costs (such as those of queuing and filling in forms), and psychic costs (such as those of the stigma experienced by signalling membership to a group, say, the poor). Standing (2008) warns that the administrative costs of means-testing could be very high relative to the overall cost of the programme, while Manwu (2015) warns that means-testing programmes ‘can lead to corruption and clientelism’. Apart from cost considerations, means-tested programmes are compatible with two types of targeting error: the error of excluding the genuinely deserving, and the error of including the undeserving. Exclusion errors ensure the persistence of poverty, while inclusion errors spell wasteful leakages.On the opposition to UBI based on the view of inadequate budgetary allowances available for poverty alleviation, Mkandawire (2005, p. 3) suggests that the idea of limited resources stems from the insistence on a limited role for the state, which in turn argues for deep tax cuts: ‘often the most widely applied taxes and the easiest to collect (for example, taxes on trade) are removed as part of adjustment polices. This is then invoked to argue that, partly as a result of the fiscal crisis and retrenchment, the state has less capacity for providing universal services and is better off targeting both its limited financial resources and its much-reduced capacity.’ In similar vein, Mulvale (2008, p. 21) argues that ‘neoliberal forces have fuelled the cry for wide and deep tax cuts, thereby diminishing public revenue streams and making social programs less affordable’.The debate, notably in the Indian context, has often revolved around an ‘either-or’ orientation to the issue of choice. This is reflected, for instance, in the position of some scholars who have advocated the replacement of current welfare spending, in some of its components, by cash transfers. The welfare intervention most frequently identified in this context is the public distribution system—the reader is referred to, among others, Kapur, Mukhopadhyay, and Subramanian (2008), Parikh (2013) and Svedberg (2012). The suggestions made by these authors represent different orders of persuasiveness, but what they share in common is the firm rejection of particular in-kind welfare transfers in favour of cash transfers. A major, and it seems to us undeniable, reason for this preference is the huge order of inefficiency, waste, leakage, misdirection and theft that attends welfare schemes such as the Public Distribution System (PDS) for food, and which is reflected in the small ratio of benefits accruing to the deserving poor to the total cost of the schemes.The emphasis on a complete switch-over to cash transfers is particularly insistent in the works of Kapur, Mukhopadhyay, and Subramanian (2008), Parikh (2013), and Svedberg (2012). The latter two are concerned with the Public Distribution System in particular, while Kapur, Mukhopadhyay, and Subramanian (2008) are more expansive in their ambitions for cash transfers, presenting the case for these as the preferred mode of social assistance in respect of as many as four categories of central government expenditure on the social sector: PDS for food and fuel, fertilizer subsidy, rural housing, and self-employment schemes. The case for substitution is renewed in the Economic Survey 2017: in Chapter 9 of the Survey (Government of India, 2017, p. 172), we find this rather explicitly articulated sentiment on the prospects of a UBI for India: ‘A number of implementation challenges lie ahead, especially the risk that UBI could become an add-on, rather than a replacement of, current anti-poverty and social programs (sic), which would make it fiscally unaffordable.’ Such a relatively across-the-board endorsement of cash transfers as a substitute for extant welfare schemes does tend to provoke the understandable anxiety that the enthusiasm for this mode of assistance is inspired less by considerations of efficiency and equity in the delivery of benefits to the poor than by a desire on the part of government to divest itself of certain long-standing and messy social sector-related responsibilities, through the simple expedient of ‘throwing money at the poor’. This is reflected, for example, in the apprehension of commentators like Jean Dreze, when he says (Dreze, 2017): ‘… there is a real danger of UBI becoming a Trojan horse for the dismantling of hard-won entitlements of the underprivileged.’It appears unexceptionable on the part of Kapur, Mukhopadhyay, and Subramanian (2008) to point out that many existing welfare schemes are marked by waste and inefficiency, the failure of resources to reach their intended beneficiaries, weak state accountability, and leakages. It is not completely clear though how these deficits will be made up by a system of cash transfers and decentralized delivery: after all, cash transfers will continue to be in the hands of the government and its functionaries (which makes it hard to envisage a sudden cessation, through transition to cash transfers, of ‘… clientalism, patronage and corruption’ (p. 40)); and decentralisation, as the authors themselves acknowledge, carries with it the risk of capture by local elites. The enthusiasm for cash transfers thus appears, from time to time, to be informed rather largely by a suspicion of extant welfare schemes which does not extend to cash transfers, and hope for cash transfers which does not extend to extant schemes. Elsewhere, both support for and caution against the supposed virtues of cash transfers make for some confusion experienced by the reader. Thus, the case for cash transfers is apparently strengthened by the government’s prior experience of cash transfers and decentralised administration in terms of the Mahatma Gandhi National Rural Employment Scheme (which, however, it is useful to emphasise, is a conditional transfer programme), but we are also told that the virtues of self-selection and decentralised support that are supposed to inform this Scheme, are ‘… features [that] have not been operationalised in the implementation phase’ (p. 41). Again, the authors lament ‘… the fate that has befallen our existing C[entrally] S[ponsored] S[chemes]’ (p. 43), but go on to assert that ‘… it is naive to believe that direct transfers are immune to a similar fate.’ Overall, one gathers the impression that the possibilities of reform and learning-by-doing are to be allowed on a larger scale for cash transfers than for existing welfare schemes (for which the possibilities of rectification are restricted to this assessment: ‘When all else fails, we trot out isolated experiences in Kerala or point to the Tamil Nadu mid-day meal (MDM) scheme as examples of what is feasible’ (p. 38)).Svedberg (2012) provides a compelling critique of the massive levels of waste, inefficiency, and unrecovered costs of the ‘food security’ supposed to be delivered by India’s Public Distribution System. He advocates targeted (rather than universal) cash transfers in favour of the existing scheme of targeted in-kind transfers, aimed at minimizing exclusion errors. He expects that cash transfers will result in higher levels of net benefit per person than obtains with the present arrangement of in-kind transfers. Realistically, he suggests that a system of digitised Unique Identifiers (UIDs) might have to be in place before cash transfers can be effected. A morally and politically compelling issue that needs to be taken into account is the objection to UIDs on grounds of their intrusiveness, assault on privacy, and unhealthy strengthening of state surveillance and control. However, one must also contend with Svedberg’s view that (p. 59) ‘… if almost complete coverage of the UIDs is accomplished in a few years’ time, the question is why not use the then existing technology for transferring cash to poor households rather than providing food in a system that has proved extremely costly and inefficient in all its dimensions?’ Having said this, not everyone might subscribe to the notion that cash transfers will always be scrupulously indexed for inflation in a timely fashion, nor that cash transfers will not be accompanied by any special disposition in favour of wasteful or undesired non-food expenditures on the part of beneficiaries.Kirit Parikh (2013) advocates a near-universal cash transfer scheme (entailing exclusion of the obviously rich), based on identification of beneficiaries through Aadhar (UID) Cards which will entitle beneficiaries to the use of food coupons. Chaudhuri and Somanathan (2011) also criticise the present PDS arrangements on the scores of the costs, waste and theft associated with them, and prescribe instead a system of cash transfers which they foresee will, at the same current costs incurred by the PDS, deliver a significantly larger quantum of benefits to the recipients of assistance. The authors emphasise the importance of having in place a system of biometric identification of beneficiaries (which among other things should facilitate the automatic exclusion of tax-payers from the ambit of assistance), and the facility of cash transfers through bank accounts or electronic conveyance to shops. There is a case for entertaining reservations about the possibility, in the near future, of having extensive rural banking or efficient electronic transfer facilities.It is therefore with reason that Chaudhuri and Somanathan recommend a relatively staged and unhurried transition from kind to cash, to be based on the results of carefully structured pilot experiments. The emphasis on gradualism is even more pronounced in the work of Kotwal, Murugkar, and Ramaswami (2011). Their principal emphasis is on universalism rather than targeting in the provision of food assistance, and their preferred option is to secure this universalism through cash transfers rather than the existing PDS arrangement. These transfers would again require that a system of biometric identification be in place. Food coupons are recommended, and to guard against the erosion of the value of these coupons through inflation, the authors offer the sensible suggestion of specifying entitlements in terms of the quantity of foodgrains to which the beneficiary is entitled. It is not completely clear, though, that something like the sale of in-kind entitlements back to the market under the present PDS cannot be envisaged in a system of cash transfers: presumably, a coupon-holder can still sell his coupon back to the shopkeeper for some value between the subsidised price he is entitled to and the market price; and the shopkeeper can encash the coupon, while diverting the food grain in his possession back to the market. But there are other advantages to a cash transfer scheme which Kotwal, Murugkar, and Ramaswami (2011) point to, and which deserve serious attention. One such advantage is the fillip given to the production of local grains in a cash system: in a centralised system of procurement and distribution, the tendency is to concentrate on fine cereals (wheat and rice) in a few major states, at the cost of neglecting less developed states specialising in coarser cereals. Perhaps the most appealing aspect of Kotwal et al.’s advocacy relates to the gradualism it emphasises, in favour of an immediate and comprehensive transition from one system of targeted in-kind transfers to another system of universal cash transfers. Indeed, the authors go far beyond an ‘either-or’ approach, by suggesting the possibility of a gradual introduction of cash transfers in which the latter piggyback on ‘… existing programmes such as [MNREGS], pension schemes and the Sanjay Gandhi Niradhar Yojana’ (p. 75); or in which they ‘… build on the existing structure of the PDS [which] has the advantage of a graduated transition.’ Such prescriptions of co-existence rather than outright and immediate replacement come across as reasonable, moderate, realistic, and non-threatening. They also inhibit the somewhat knee-jerk reaction that is often in evidence in identifying in-kind transfers with a radical orientation to social policy and cash transfers with a reactionary orientation (in this connection, the reader is referred to Painter, 2016).In the literature on Basic Income, per se, Guy Standing (2014, 2016) has been a prominent champion of (mainly universal) cash benefits which he suggests should be rolled out in India ‘slowly and systematically’ (2014, p. 133), as opposed to cash or in-kind transfers revolving around incentives (hospital delivery of girls), subsidies (the Public Distribution System), bonuses (lump-sum community-directed payments), and public works programmes (wage-employment interventions such as the Mahatma Gandhi Rural Employment Generation Schemes). If Standing has a pronounced preference for BI as a replacement for targeted, conditional transfers, then this preference is revealed to be precisely inverted in the implementation of welfare provisions in Latin America over the last couple of decades. The neglect of Basic Income in favour of targeted and conditional social assistance is a fact recorded and criticised, in the context of Latin America, by both Reuben Lo Vuolo (2013) and Lena Lavinas (2013). These authors note that the promise of a Citizen’s Income (CI) in Latin America (and of a constitutionally guaranteed CI in Brazil) has been largely violated, in practice, by implementation of conditional cash transfers which transgress the features of both unconditionality and universalism inherent in the notion of a CI. In the debates on Basic Income in Latin America as well as in both middle-income and advanced welfare states, a more plural approach which is accommodative of diverse forms of social assistance is discernible in the work of commentators such as Louise Haagh (2007, 2011, 2013, 2017a, 2017b). On Citizen’s Income (CI) in Latin America, Haagh (2013, p. 227) says: ‘… rebuilding security in a way that does not recreate labour market dualities and hierarchies depends on integrating universal basic security of income (CI) and of opportunity (equality of initial schooling) with dynamic systems to support mobility and savings (training opportunities, unemployment insurance)’. At a more general level, she says (Haagh, 2017a, p. 3): ‘A basic income is a floor that can help motivate long-term savings strategies and – together with other regulatory changes – can form part of a re-design of social insurance in a way that this can support a broader affiliation base… there is no principled or indeed practical reason to view basic income as in conflict with more complex welfare systems that – such as in Nordic states – pursue human development more intentionally.’ Again, in Haagh (2017b, p. 1), we find: ‘I argued in [Haagh, 2011] … against a conventional view of basic income as being in conflict with established welfare states and with social democracy. In place of this, I suggest basic income can be viewed as part of a re-democratised welfare state. In this sense, it is not a radical alternative, but a natural extension of an established tradition.’Mention must be made, in this connection, of Sudha Narayanan's (2011) sensible plea for a ‘reframing of the cash transfer debate in India’, wherein she underlines the unwisdom of insisting that one must either be for cash transfers or against cash transfers. Rather, it would be helpful, in this view, to recognize that the appropriate form of intervention could be highly context-dependent. In principle, interventions can describe any one of at least these eight combinations of characteristics: (targeted, conditional, in-kind), (targeted, conditional, cash), (targeted, unconditional, in-kind), (targeted, unconditional, cash), (universal, conditional, in-kind), (universal, conditional, cash), (universal, unconditional, in-kind), and (universal, unconditional, cash). While the common tendency is to see the choice as being restricted to one of the first and last of these approaches, in principle and fact, there is a wide spectrum of possible combinations to choose from, the precise merits of which would depend on the nature of intervention and the context under review. From her review of some of the available literature, Narayanan suggests that there may be a differential case in favour of supply-side, in-kind provisioning where food, nutrition, health and education are concerned, just as there may be a differential case in favour of ‘cash-assisted in-kind transfers’ such as vouchers where inputs such as seeds and fertilizers are concerned, and a case in favour of conditional cash transfers where these conditions can be met because of the prior existence of relevant in-kind provisioning (mid-day meals for children conditional on school attendance make sense where schools already exist). This way of viewing the problem allows for the co-existence of different forms of intervention, as opposed to mutually exclusive choices for these.Finally, it appears to be important to emphasize that universalism does not necessarily reduce the burdens or costs of administrative intervention. In particular, proponents of Universal Basic Income would do well to recognize that the problems of identification, for both eligibility and delivery, are very much a part of universal schemes of assistance, too. This issue has been strongly and convincingly underlined by De Wispelaere and Stirton (2011). These authors concede that, on net, UBI may be more efficient than means-tested assistance, but they also warn that the differential efficiency may be exaggerated. In particular, universalism should be substantive and not just formal, that is, all citizens, including in particular marginalized citizens, must be actively enabled to access the benefits due to them, and not simply not have restrictions placed on such access. This would require that we have a complete registry of the universe of eligible beneficiaries. Secondly, these beneficiaries must also be reached, or have their due benefits delivered to them (for example, cash transfers would be meaningless if people did not have bank accounts or, worse, did not have banks in their neighbourhood where they could open accounts). The requirements of both exhaustive identification and realized delivery place a considerable burden of administrative involvement in terms of what De Wispelaere and Stirton refer to as the compulsions of cadasterability and conduitability (or, loosely, listing and reaching out to, respectively). A practical question that needs to be answered here is whether, and to what extent, the requirements of unique biometric identification can be avoided in a system of efficient social assistance, despite the unwelcome features of surveillance and intrusion which a system of UID can and probably will carry. In a broad way, what this suggests is that no matter what system of social assistance we resort to, public action to ensure a measure of probity, competence and scruple on the part of government is unavoidable. The issue, in other words, is perhaps more squarely located in the culture of democratic practice than in the artfulness of mechanism design.4.3UBI as supplement, not substituteThe ‘either-or’, ‘exclusively for-or-exclusively against’ nature of the debate one often encounters on the subject of a UBI is neither practically nor conceptually wholly appealing. The somewhat polarising and polemical nature of the debate tends to detract attention from more important rational issues of policy design and implementation. Having said this, how important, for the purposes of the present paper, is the possibility that the claims and counter-claims considered in Section 4.2 may not be conclusive? Arguably, not very, because in our own exploration of the possibility of a UBI for India in this paper, we suggest that the choice between UBI and MTGs is not necessarily one that needs to be addressed. We take the view that a UBI is feasible without compromising other existing welfare programmes. This is not a fiscally irresponsible statement to make if it can be shown that additional resources which do not entail reductions in budgetary provisions for other necessary and existing welfare schemes can be found. It is remarkable that the notion of UBI has found favour in a crop of recent opinions on the subject available on the website Ideas for India (see Banerjee, 2016; Bardhan, 2016; Ghatak, 2016; Joshi, 2016; Moene & Ray, 2016; Ray, 2016; Srinivasan, 2016). Two avenues which we explore in this paper of mobilizing additional revenues to finance a UBI for India are through mopping up unaccounted income in the economy and through savings that can be effected by withdrawing various tax exemptions and concessions presently available to the affluent.To state our position explicitly: we advance the case for a universal guaranteed basic income for all citizens of India in addition to all existing welfare schemes for the poor, many of which, of course, need to be revamped, rationalized, and made altogether less leaky (though this is a subject we do not [need to] explore in this paper, given that we are speaking of supplementation, rather than apportionment, of the existing welfare budget). Indeed, our case for supplementation rather than replacement shares much in common with the view of Narayanan (2011, p. 41) when she observes: ‘… there is little empirical justification for wholehearted endorsement of cash transfers as substitutes for state provision of services and commodities in the area of food, nutrition, health and education. Indeed, the remarkable success of cash transfers in these areas has come when they have been used in tandem with extensive in-kind provision by the State, as demand-side interventions to incentivise households.’With this (necessarily somewhat elaborate) preliminary clarification out of the way, we can attend to a consideration of the affordability of a supplementary UBI for India.5Toward a guaranteed minimum income/consumption5.1Redistribution and tax reluctanceAtkinson's (2014) work on income inequality stresses the importance of redistributive strategy as a remedy for disparity. Among various measures and ideas which he suggests should be explored are: the payment of a ‘minimum inheritance’ to all citizens upon attaining adulthood; the payment of substantial Child Benefit to all children and its taxation as income; the introduction of a ‘participation income’ at the national level; a more progressive income-tax structure; a progressive tax on lifetime capital receipts (of gifts and inheritance); a more progressive property tax; an annual wealth tax; and a minimum tax for corporations. What, by contrast, do we find in India? The country, with a tax-to-GDP ratio in the region of 17 %, is one of the relatively more under-taxed economies in the world; regressive indirect taxes account for more than a half of gross tax receipts in the annual budget; agricultural income and wealth are not taxed; the marginal personal income-tax rate is capped at just 30 %; and tax concessions on corporate tax in recent budgets have outstripped spending allocations for centrally sponsored social sector schemes. In what follows, we consider two alternative ways of finding the resources needed for a modest Universal Basic Income Scheme.5.2Resource-mobilisation for a universal basic income through recovery of unaccounted income and redeployment of public spendingWe begin with a crude assessment of resources that would be required for the financing of a limited UBI. Suppose, specifically, that each person in the country were guaranteed a minimum income of Rs. 20 per day, or Rs. 600 per month (or Rs. 3,000 per family of five per month), or Rs. 7,200 per year. Given a 2014 population size of 1,267 million, the aggregate country-wide budget for the guaranteed income (for 2014) would be around Rs. 9122 billion (= 7,200*1,267 million), where ‘one billion’ connotes ‘one thousand million’. The GDP at factor cost in 2014 was of the order of Rs. 104,728 billion. The proposed UBI bill, as a proportion of GDP, works out to 8.71 % for 2014. We shall take this proportion as our ball-park estimate of the financial resources needed to fund a UBI from year to year. (Notice that both inflation and population growth would raise the numerator of the ratio over time, and that economic growth would raise the denominator: we make the simplifying assumption that the ratio of the UBI bill to GDP will remain constant, over time, at 8.71 %.)In the co-existence of severe income-poverty with growing income-inequality, perhaps the most glaring iniquity on view is the burgeoning size of the unaccounted economy. In December 2013, a report on the estimated size of the unaccounted economy was submitted to the Government of India by the National Institute of Public Finance and Policy (NIPFP). Since then, there has been a change in the central Government, but till date the Finance Ministry has not released the NIPFP report into the public domain, despite many clamorous promises made, as part of its earlier election mandate, to mop up unaccounted incomes. In a press leak reported in the August 14th, 2014 issue of the national daily The Hindu, we find the following (and, incidentally, further detail is not available since, as already mentioned, the report is still not a public document): Driven substantially by the higher education sector, real estate deals and mining income, India’s black economy could now be nearly three-quarters the size of its reported Gross Domestic Product (GDP). These are among the findings of a confidential report commissioned by the government and accessed exclusively by The Hindu. Since there were no "reliable" estimates of black money generated in India and held within and outside the country, the UPA government commissioned the National Institute of Public Finance and Policy (NIPFP) to estimate the black money in India and held overseas by Indians. The Special Investigation Team on black money, constituted by the Narendra Modi government on May 27 in compliance with a Supreme Court directive, is studying the report. Though the report was submitted to the Finance Ministry in December 2013, the UPA’s Finance Minister P. Chidambaram did not place it in Parliament. Nor has his successor Arun Jaitley done so.What if the unaccounted money circulating in the Indian economy were to be employed to finance a guaranteed basic minimum income for the citizens of the country? The underlying arithmetic of such a proposal is explored, in an admittedly crude fashion, in what follows. Let us now assume that the unaccounted economy is less than the 75 % of national Gross Domestic Product (GDP) reported in the news item presented above. Specifically, let us suppose that this figure is pegged at just 50 %, which is substantially lower than the figure attributed to the NIPFP, and lower also than Arun Kumar's (2016) recent estimate of 62 % for the year 2012. By this reckoning, the size of the black economy in 2014 should be of the order of Rs. 52,364 billion (which is one-half of the 2013–14 GDP of Rs. 104,728 billionTable 1: ‘Macro-Economic Aggregates (at current prices)’ in Reserve Bank of India: Handbook of Statistics on the Indian Economy 2014–15, RBI: Mumbai.). If this sum were to be impounded and reinvested to earn an annual return of 10 %, then we are speaking of an annual income stream of something like Rs. 5236 billion, which is 5 % of India’s 2013–14 GDP of Rs. 104,728 billion.Is mopping up black money the only available means of financing a modest income guarantee scheme? It would appear that even if we were to set aside this route to resource-mobilisation, it should still be possible to find a good part of the funds needed for a UBI scheme in India. Specifically, there are a number of direct tax concessions or incentives on income tax provided by the central government to corporates, associations of individuals, and individuals. Additionally, the central government also provides excise duty and customs duty exemptions. From 2006–07 on, the central government has furnished an account to Parliament, in the form of an annexure to the annual Union Budget, of ‘revenue forgone’ due to various exemptions and concessions. Table 6 provides information on estimates of ‘revenue forgone’ for the nine financial years 2005–06 to 2013–14: these have been put together from data available in the relevant AnnexSee the relevant Union Budget documents, which are readily available on the web. of The Receipts Budgets of the corresponding annual Union Budgets of the Government of India. The Table also furnishes data on India’s GDP at factor cost in current prices for each of the 9 years from 2005–06 to 2013–14.Table 1: ‘Macro-Economic Aggregates (at current prices)’ in Reserve Bank of India: Handbook of Statistics on the Indian Economy 2014–15, RBI: Mumbai. Finally, Table 6 provides information on the ratio of Revenue Forgone to GDP in each of the years 2005–06 to 2013–14: the simple average of these year-wise ratios over the 9 years under consideration works out to 6.45 %. Adding this to the figure of 5 % of GDP accounted for by the black economy (see our earlier discussion), yields an aggregate annual Funds Available-to-GDP ratio of 11.45 %. The contribution of the black money component will of course diminish with time owing to both inflation and the growth of the economy, but the Funds Available-to-GDP ratio of 11.45 % is comfortably in excess of the UBI Bill-to-GDP ratio of 8.71 % estimated earlier.Table 6:Revenue forgone due to exemptions and concessions in the Union Budgets of the Government of India: 2005–06 to 2013–14.YearRevenue forgone/revenue impact as result of exemptions and concessions to direct and indirect taxes (Rs. billion)GDP at factor cost(Rs. billion)Ratio of revenue forgone to GDP (%)2005–06206733,9056.102006–07239739,5336.062007–08285145,8216.222008–09414153,0367.812009–10482461,0897.902010–11459772,4896.342011–12533683,9176.362012–13566293,8896.032013–145499104,7285.25Average for 9 years6.45Source: ‘Revenue Forgone’ figures are from the relevant Union Budget Documents of the Ministry of Finance, Government of India, and GDP figures are from Table 1: ‘Macro-Economic Aggregates (at current prices)’, in Reserve Bank of India: Handbook of Statistics on the Indian Economy 2014–15, RBI: Mumbai.It should be added that in these ball-park estimates we have not taken account of the cushions that accrue largely to the non-poor population, in the form of subsidies on liquefied petroleum gas (LPG), kerosene, gold and diamond: these, for the financial year 2015–16, add up to around 1033 billion, or a little less than one additional percent of GDP.See Annex 15 (The Receipts Budget, 2016–17), http://indiabudget.nic.in/ub2016-17/rec/annex15.pdf. and Chapter 6 of the Economic Survey 2015–16,http://indiabudget.nic.in/es2015-16/echapter-vol1.pdf Available at http://www.cbgaindia.org/wp-content/uploads/2016/06/Note-on-Resource-Mobilization-new.pdf Nor have we included revenue that could be generated from taxing agricultural income, wealth, and inheritance. The report How Can Additional Tax Revenue Be Mobilized in India?,Available at http://www.cbgaindia.org/wp-content/uploads/2016/06/Note-on-Resource-Mobilization-new.pdf submitted to the Office of the 14th Finance Commission by the Centre for Budget and Governance Accountability in September 2014, has some interesting findings on revenues that are now foregone by not taxing wealth. The report suggests that the wealth of 7,850 ‘ultra-high-net-worth’ individuals adds up to about Rs. 56,567 billion (for 2013): at a tax rate of 1 %, the wealth-tax proceeds from just this minuscule segment of the population would amount to one-half of one percent of the 2013–14 GDP; if the tax rate were to be raised to 5 %, that would account for nearly 2.7 % of the 2013–14 GDP. Bahri (2016) provides some interesting details on agricultural tax exemptions claimed by agro-based companies in India; while we do not explore the issue further here, Bahri’s work suggests the clear potential that exists for taxing agricultural income. Overall, it appears that a combination of drawing on the black economy, redirecting tax concessions and exemptions from the rich to the poor, cutting down on subsidies now available to the affluent, and extending the coverage of direct taxation to sectors such as wealth and agriculture, should release sufficient resources for funding a modest UBI scheme of the type we have proposed.5.3A negative income tax schedule for India, 2013–14: An illustrative exampleOne way of implementing a Universal Basic Income scheme is via a ‘negative income-tax schedule’ of the type proposed by Tobin (1966). We consider an illustrative example of such a schedule, as it might have obtained for India for the year 2013–14. Employing the distribution of consumption expenditure as a proxy for the distribution of income (while noting that inequality in the latter would be greater than in the former), we can generate, as in Table 7, a schedule of taxes for each vintile of the population, for the year 2013–14. Table 7 is to be read as follows.Table 7:Tax schedule for guaranteed minimum income.(1)(2)(3)(4)(5)(6)(7)(8)VintileEarned incomeTax@8.71 %Post-tax earned income [(2)–(3)]TransferPost-tax-cum-transfer income [(4) + (5)]Effective tax [(3)–(5) = (2)–(6)]Effective tax rate [(7)/(2)] %124302211922183720029383−5081−20.91230914269328221720035421−4505−14.57335047305331944720039194−4147−11.83438519335535164720042364−3845−9.98541825364338182720045382−3557−8.51644966391741050720048250−3284−7.30747942417643766720050966−3024−6.31851248446446784720053984−2736−5.34954885478150105720057305−2420−4.411056687511251575720058775−2088−3.681162820547257348720064548−1728−2.751267449587561574720068774−1325−1.961372739633666403720073603−864−1.191479187689772290720079490−303−0.351586791756079232720086432+359+0.411696545840988136720095336+1209+1.251710960595471000567200107256+2349+2.1418129112112461178667200125066+4046+3.1319164655143421503147200157514+7142+4.3420355926310013249217200332125+23801+6.69Aggregate826647200754647200826640Source: Computations based on National Sample Survey data on the distribution of consumption expenditure in 2011–12 (detailed citation available in Table 2).The objective is a guaranteed basic income of Rs. 600 per person per month, or Rs. 7,200 per person per year (which is equivalent to a monthly basic income of Rs. 3,000 for a family of 5).The distribution of consumption expenditure has been taken as a proxy for the distribution of income.Average vintile incomes have been estimated by applying average vintile consumption expenditure shares to the aggregate national Gross Domestic Product of Rs. 104,728 billion (at current prices) in 2013–14.Average estimated annual per capita income in 2013–14 at current prices is Rs. 82,664. The guaranteed annual per capita basic income is Rs. 7,200. The latter, as a proportion of the former, is 8.71 % (designated as‘Tax @ 8.71 %’ in Column 2).The tax on the richest 15 % of the population is 5.38 % of their earned income, while the transfer to the poorest 15 % of the population is 15.21 % of their earned income. The transfer to the poorest half of the population is 8.14 % of their earned income.Column (2) provides information on vintile-specific per capita ‘earned income’, and is obtained by applying the vintile-specific consumption expenditure share (computed from National Sample Survey data on consumption expenditure distribution for 2011–12) to the aggregate GDP of Rs. 104,728 billion in 2013–14. As we have seen earlier, the annual national bill of a guaranteed basic income scheme of Rs. 600 per person per month for 2013–14 is Rs. 9122 billion, which works out to 8.71 % of the aggregate GDP of Rs. 104,728 billion. Column (3) of Table 7 furnishes information on the vintile-specific per capita tax liability that would arise from a uniform application of a tax-rate of 8.71 % on all incomes. Column (4) gives data on each vintile’s post-tax income per capita, while Column (6) provides vintile-specific information on post-tax-cum-transfer income per capita, obtained from adding the guaranteed per capita basic income of Rs. 7200 to each vintile’s post-tax per capita income. The net or effective per capita tax liability in each vintile is just the difference between tax and transfer [Column (3) minus column (5)] or, equivalently, the difference between earned per capita income and post-tax-cum-transfer per capita income [Column (2) minus Column (6)], and information on this quantity is provided in Column (7). Effective tax as a proportion of earned income in each vintile is the effective tax-rate applicable to that vintile; and this schedule of effective tax-rates is furnished in Column (8) of the Table. The effective tax rate is negative when one is a net receiver of the basic guaranteed income, and positive when one is a net donor.Table 7 reveals that it is only in the 15th vintile that the effective tax-rate is virtually zero (or very mildly positive). That is to say, with even a modest guaranteed basic income of just Rs. 3000 per month for a family of five, individuals constituting at least the poorest 70 % of the population would be net beneficiaries (obviously in varying degree) of the basic income scheme. It turns out that the tax on the richest 15 % of the population is just a little over 5 % of their earned income, while the transfer to the poorest 15 % of the population is just a little over 15 % of their earned income. The transfer for the below-median population is about 8.14 % of their earned income. Additionally, it should be noted that the basic income scheme here is being financed out of the legitimate dues of the Indian tax-payer to the tax authority, dues that have been reneged on. As we have seen earlier, some economists in recent times have tended to recommend direct cash transfers as a substitute for other (allegedly corrupt, wasteful and inefficient) public social security measures such as the Public Distribution System for food. Our suggestion for direct cash income transfers, however, does not call for the removal of any pre-existing social security measure: the programme’s funding calls only for the enforcement of better tax-compliance, and redirection of public spending from the rich to the poor, not fresh mobilization of resources.Having said this, it is useful to take a closer look at a couple of assumptions underlying the numbers in Table 7. First, the exercise we have performed presumes preparedness and ability on the government’s part to identify and recover black incomes. As a literally empirical assumption, this is obviously a tall order. It would be fruitful to see our presumption not so much as a factual assumption as a statement of a condition under which the problem of poverty can be addressed. This, we believe, is of value, because it is reasonable to expect both that undeserved poverty should be eradicated, and that income-tax authorities, investigative agencies and the Enforcement Directorate have a mandate to fight the crime of unaccounted money. The government is, of course, free to dismiss such suggestions as being based on unreal assumptions: that is a reason for, rather than against, inviting the government to express itself explicitly on the matter.Second, the income-tax schedule in Table 7 (see Column 7) presumes that it is possible to have access to the information that is required in order to disburse the effective net transfers, and collect the effective net taxes, in the right amounts among the right persons, such as is dictated by the schedule. This informational assumption—an admittedly heroic one—seems to be a generic problem of the Negative Income Tax approach, but one which is often on all fours with recommendations of targeted transfers of all kinds. One way of mitigating the informational problem—albeit at a cost—is the following. Using Column 7 of Table 7 as a point of reference, it can be worked out that the per capita effective net transfer to each of the poorest 14 vintiles is Rs. 2,779. Suppose the effective net tax liability, which in Table 7 is borne by the six richest vintiles, is now transferred entirely to the richest vintile. We can then have an effective schedule of net taxes of (−) Rs. 2,779 to each of the 14 poorest vintiles, of zero to each of the 15th, 16th, 17th, 18th and 19th vintiles, and of Rs. 38,907 to the richest vintile. In this scheme, the informational requirement on who has what income is considerably less demanding than in the earlier scheme of individually-tailored and individually-differentiated net tax liabilities: in the revised scheme, we need to be able to discriminate only the 15th and higher vintiles from the rest of the population. The vintile-specific effective tax-rates, under the ‘original scheme’ of Table 7 and under the ‘alternative scheme’ just outlined, would be as presented in Table 8. The cost of the informational easing-up entailed by the revised scheme is that the effective tax schedule is a good deal less progressive than under the original scheme. These are the sorts of tradeoffs, illustratively, that may have to be made between the demands of precise targeting and the demands of equity.Table 8:Vintile-specific effective tax-rates under the original and the revised schemes.VintileEffective tax rate Under original scheme (%)Effective tax rate Under revised scheme (%)1−20.91−11.432−14.57−8.993−11.83−7.934−9.98−7.215−8.51−6.646−7.30−6.187−6.31−5.808−5.34−5.429−4.41−5.0610−3.68−4.9011−2.75−4.4212−1.96−4.1213−1.19−3.8214−0.35−3.5115−0.41016+1.25017+2.14018+3.13019+4.34020+6.69+8.91Source: Derived from Table 6.Note: The terms ‘Original Scheme’ and ‘Revised Scheme’ are explained in the text.5.4Tax-burden implicationsChapter 9 of the Economic Survey 2017 (Government of India, 2017, p. 175) on the prospects of a Universal Basic Income for India sounds somewhat nervously anxious when it says: ‘It is important that UBI is not framed as a transfer payment from the rich to the poor.’ Our own view is quite explicitly the opposite of this: without being prepared to undertake redistributive taxation and transfers, it is hard to conceive of a UBI which is not just a substitute for existing welfare programmes. With a tax-to-GDP ratio of 16–17 %, India is an under-taxed economy. With indirect taxes accounting for one-half of budgetary tax resources, it is also a regressively taxed economy. The Income Tax Department’s time series data suggest that in the assessment year 2012–13, only around 44.3 million individuals out of around 1200 million individuals in the country, i. e. 3.69 %, were income tax assessees, and that the number of actual tax payers (including those making zero payment) stood at 31.3 million,Available at http://www.incometaxindia.gov.in/Documents/Direct%20Tax%20Data/Income-Tax-Statistics-IT-Return-AY-2012-13-V2-Final.pdf or around 2.61 % of the population. Presumably, there is scope for widening the tax-base.Further, entire categories of potential sources of revenue are now exempt from taxation—including wealth and agriculture. Tax loopholes permit tax-avoidance, while lax enforcement promotes tax-evasion. The Hindu’s report on the NIPFP study cited earlier indicates that the black economy is largely in the real estate, higher education, and mining sectors. This suggests that wealth holding and creation of black money are related. In this connection, our own on-going work on household asset holdings based on the 2012–13 National Sample Survey data on debt and investmentHousehold asset holdings are estimated from unit level data made available in CD-ROM, labelled as:NSS-70-Sch 18.2 (CC/NSS/7859). National Sample Survey Office, New Delhi. reveals, among other things, that (a) land and buildings accounted for about 91 % of all household assets in 2012 in India; and (b) around 46.7 % (a simple average of rural and urban shares) of all assets in the country were held by the richest five percent of households in the country in 2012. These are indicators of the reasonableness of concentrating on the top vintile, or even the top one percent, of income earners and wealth-holders as the segment of the population most likely to yield returns on the taxation of both accounted and unaccounted income and wealth. In the matter of the black economy, the accumulated stocks of unaccounted wealth, and continuing streams of unaccounted income—earned through illegal means (such as corruption, bribery, over- and under-invoicing of imports and exports respectively, and illicit trafficking in humans and narcotics) or through legal channels but not declared for taxation (such as from investment in real estate, gold, and educational and health-care businesses)—are a massive source of untapped resources that could and should be employed for financing, at least partially, a meaningful UBI.We have also noted that it should be feasible to finance the UBI largely through redeployment of some elements of public spending, that is, largely by withdrawal of tax concessions and exemptions to the affluent. This amounts simply to substitution of one item of public spending (presently directed at the non-poor population) by another item (the UBI), and should therefore not entail any additional net tax burden. Even so, let us assume, contrary to this, that expenditure on the UBI will involve an add-on rather than a substitution. Given that the UBI Bill-to-GDP ratio is of the order of about 9 %, the tax-to-GDP ratio should rise from the present low level of about 17 % to an un-extravagant figure of 26 %. This difference would represent the maximal (and unrealistically large) incremental tax burden entailed by a UBI of the sort we have described. The numbers are telling.6Concluding observationsIn considering the competing claims of means-tested targeted assistance and a guaranteed universal basic income, we have argued, in Section 4, against creating a false dichotomy between the two forms of welfare provisioning. Rather, the emphasis has been on seeing a proper role for each form of assistance in a view of the world that allows for contextual relevance and situational appropriateness. The advocacy is for mutual co-existence, with UBI piggy-backing on existing welfare schemes, or taking advantage of such schemes, where they exist, in order to complement them, or simply serving as an add-on.The case for UBI is strengthened by taking a view of money-metric poverty that diagnoses the condition in terms of the lowness of income—pure and simple—of the income-poorest sections of a society. Such a direct and instructive view of money-metric poverty is denied by the several logical and practical inadequacies of the standard ‘identification-cum-aggregation’ approach to the measurement of poverty. Section 2 has been concerned to review these inadequacies, and has paved the way, in Section 3, for an assessment of India’s poverty in terms of the magnitudes and trends in average consumption of the consumption-poorest fractions and numbers of the country’s population. ‘Quantile-income’ measurement exercises suggest that poverty is both more serious and has been less amenable to significant reduction through the trickle-down effects of growth than standard approaches to poverty and inequality measurement would allow.The need for income-supplementation, by way of a universal guaranteed income for every citizen of the country, suggests itself as an obvious mechanism for the alleviation of money-metric poverty in such a context. Section 5 considers the affordability of such a UBI scheme which leaves budgetary provisions for existing welfare schemes intact, while advocating mobilization of resources for the UBI through a drawal on the unaccounted economy and a redeployment of concessions and subsidies currently available to the relatively more affluent members of society.Our own calculations, no doubt, are very crude. But we hope that the general approach outlined here will serve as an incentive for more refined computations based on more reliable data. Our objective has been to suggest that a modest, but nevertheless helpful, UBI scheme for India is affordable; and that the information problems associated with the implementation of a Negative Income-Tax Schedule need not be insuperable, with some sacrifices made on the progressivity of the Schedule. But a great deal of work still remains to be done on aspects of design and implementation, with particular reference to the issues of what De Wispelaere and Stirton (2011) call ‘cadasterability’ and ‘conduitability’.AcknowledgementsWe are sincerely grateful to two anonymous referees and the Editor of this journal for their detailed comments and suggestions on earlier versions of this paper. The usual caveat applies.Appendix A: Does first order stochastic dominance necessarily imply an unambiguous reduction in poverty?If invariance of the poverty standard is sought in the space of ‘real incomes’, then a property of cumulative distribution functions (CDFs) called ‘stochastic dominance’ furnishes a useful guide to the unambiguous poverty ranking of income distributions in terms of the headcount ratio (see Foster & Shorrocks, 1988). A cumulative distribution function is simply a plot of the cumulative proportion of the population with incomes below a given level, for every level of income in the distribution under review. Clearly, the CDF is an increasing (or at least non-decreasing) function of income: the ordinate corresponding to zero income would be zero (that is, zero percent of the population has income less than zero), and the ordinate corresponding to the highest income in the distribution is unity (that is, one hundred percent of the population would have incomes less than the highest income in the distribution). One distribution will be said to first-order stochastically dominate another, if the first distribution lies somewhere below and nowhere above the second distribution. And if this happens, then no matter what poverty line we choose, the headcount ratio for the first distribution will be somewhere lower and never higher than for the second distribution. Under these circumstances, we could say that poverty, as measured by the headcount ratio, is unambiguously lower for the first distribution than for the second.As a broad rule, one can take it as something of an empirical regularity in the Indian setting, that the distribution of consumption expenditure tends to first-order stochastically dominate an earlier time-period’s distribution as we move forward in time. Secondly, and as we have seen in the text, a ‘calorie drift’ such as is observed in India implies, equivalently, that the (real) poverty line might be expected, over time, to lie further and further above the officially determined poverty line. These two contingencies are captured in Figure 1, which displays the (hypothetical) cumulative distribution functions of consumption expenditure in two successive years, of which the first year is the officially designated ‘reference’ or ‘base’ year, and ${z_1}$z1 and ${z_2}$z2 are the presumed (real) poverty lines in year 1 and year 2 respectively: in keeping with the stylized facts we have just reviewed, the year 2 cumulative expenditure distribution function has been portrayed as first-order stochastically dominating the year 1 function, and ${z_2}$z2 has been taken to be greater than ${z_1}$z1.The official approach to determining the poverty line obliges us to treat ${z_1}$z1 as the poverty line for both years 1 and 2: this is compatible with an inter-temporal decline in the headcount ratio of poverty from ${H_1}$H1 to ${H_2}$H2 in Figure 1, and captures, in essence, the official story of steadily declining money-metric poverty. A question which immediately arises is: is there any reason for treating the pattern of consumption expenditure in year 1 as somehow normatively privileged, for us to treat year 1 as the reference year? The answer, clearly, is ‘no’. This then leaves us open to designating year 2 as the reference year, with an order of arbitrariness which is neither more nor less than the order that presided over the earlier designation of year 1 as the reference year. In such an event, the poverty line would have to be taken to be ${z_2}$z2, and we would have to conclude from Figure 1 that poverty has declined from ${H'_1}$H1′ in year 1 to ${H'_2}$H2′ in year 2. Neither the magnitudes of the headcount ratios, nor the precise rate of decline in the ratio, are the same when year 2 is the reference year as when year 1 is the reference year, although no matter whether we employ ${z_1}$z1 or ${z_2}$z2 as the poverty line, we observe a decline in poverty in year 2 vis-à-vis year 1 (the usual ‘stochastic dominance’ argument).Figure 1:Headcount ratios of poverty for alternative poverty lines.Note: Figure here 1 is the same as Figure 1 in Subramanian (2014).But what now if each of the two years were to be treated as a ‘reference year’, so that ${z_1}$z1 is taken to be the poverty line valid for year 1, and ${z_2}$z2 as the poverty line valid for year 2? This, in fact, is the procedure that would be normally compatible with the Food Energy Intake method of determining the poverty line, and the one which Utsa Patnaik (2004, 2007) insists on. In such an event, Figure 1 assures us that we would have to conclude that in transiting from year 1 to year 2, the headcount ratio has actually increased from ${H_1}$H1 to ${H'_2}$H2′.We thus see that a number of inferences are available to us on what has happened to poverty over time, and in the absence of any reasonable criterion which will enable us to privilege any one inference over any of the other inferences, we are left in an indeterminate limbo of widely differing and equally (im)plausible logical outcomes. This surely cannot be a reasonable approach to measuring poverty! And this conclusion emerges from taking seriously the notion that if the poverty line in income terms is a means to the end of escaping deprivation in functionings space, then one should allow for the possibility of a poverty standard which is absolute in the space of functionings while being variable in the space of real incomes.Appendix B: What understated poverty lines can obscureWhat constitutes the necessary means of subsistence in any society at any time is, as Marx observed in Capital, a matter that is always ‘practically known’. It is such practical knowledge that led the National Commission for Enterprises in the Unorganized Sector (Government of India, 2009) to suggest a pragmatic order of magnitude for the poverty line in India of Rs. 20 per person per day, or Rs. 600 per person per month, for 2004–05. With this poverty line (which many would argue is itself a very modest figure), one finds that the poverty line exceeds the rural average per capita consumption expenditure (as reflected in the relevant National Sample Survey data) of Rs. 564 per person per month in 2004–05. What is the implication of a poverty line which exceeds the average income?A situation in which the mean income of the reference society is less than the poverty line is one that is not often explicitly encountered in the measurement literature (though for important exceptions, the reader is referred to Lewis & Ulph, 1988; Vaughan, 1987). The problem has been considered earlier by one of the present authors (Subramanian, 1989, 2003). He shows that if H is the proportion of the population in poverty (the head-count ratio), $\mu$μ is the average income of the distribution under consideration, and ${\textit{z}}$z is the poverty line, then, in a situation in which $\mu \lt z,$μ<z, it will be the case that the minimum attainable value of the headcount ratio—call it $H*$H∗—will be given by the following expression: (1)$${\textit{H}}* = 1 - {\textit{\upmu /z}}.$$H*=1−μ/z.Briefly, the ‘man overboard’ solution to the utilitarian’s ‘life-boat ethics dilemma’ consists in requiring that a proportion ${\textit{H}}*(\equiv 1 - {\textit{\upmu /z}})$H∗(≡1−μ/z) of the population be effectively ‘thrown overboard’ from the‘life-boat’: by assigning an income of zero to each of ${\textit{nH}}*$nH∗ persons, one ensures that the headcount ratio of poverty is minimized (here n is the size of the total population). Since people presumably cannot survive without any resources whatever, the requirement, by implication, is to simply allow ${\textit{nH}}*$nH∗ individuals to perish in the cause of minimizing the headcount measure. ${\textit{H}}*$H∗ may, with justice, be called the ‘triage headcount ratio’: according to the Mirriam-Webster Dictionary (also cited in Jayaraj & Subramanian, 1999; Subramanian, 2003), triage is ‘the sorting of and allocation of treatment to patients and especially battle and disaster victims according to a system of priorities designed to maximize the number of survivors.’ The ‘triage headcount ratio’ ${\textit{H}}*$H∗ brings into relief the fact that the protocols of conventional poverty measurement are informed by a perverse morality which dictates mortality as a solution to poverty—a theme that has been addressed most notably in the work of Kanbur and Mukherji (2007). 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Journal
Basic Income Studies – de Gruyter
Published: Jun 13, 2017