Tourist brochures frequently describe Goa as some kind of utopia and the Economic Survey – expected at the end of January, a day before the next Union Budget – could go some way in bridging the gap between imagination and reality. The document will discuss the feasibility of implementing basic income, an unconditional cash transfer for all residents that could bring improvements in health, nutrition and education.
In Goa, the basic income could come out of the Goa Iron Ore Permanent Fund, created by the Supreme Court in April 2014 as part of its judgement in a case regarding widespread irregularities in the state’s mining activities. The court’s decision to set up the fund was in response to a proposal by the petitioner, Goa Foundation, and the consequent recommendation of an expert committee. The corpus was created from a new levy of 10% on the sale value of iron ore. The fund is now worth Rs 100 crores.
The idea of a basic income is to treat everyone equally by giving them, without condition, the same sum of money on a periodic basis. The benefits are many: it recognises and compensates socially useful unpaid work (such as bringing up children), provides insurance against shocks such as those presented by a sudden illness, and enables debt repayment and entrepreneurship.
It benefits the disadvantaged sections the most, and engenders personal freedom, which is appealing to both left and right-wing economists. And it has administrative simplicity since it is unconditional and for everyone.
However, there are four broad objections to the idea of basic income: Why should people get something for nothing? Why should the already rich benefit? Will people stop working and society collapse? And can we afford it?
Calculating basic income
A realistic poverty line is linked to average income. This makes it simple to estimate the gross domestic product – the value of all goods and services produced in a country in a specific time period, usually a year – required for a living basic income. Since 100% of per capita income (average income in a year) for everyone is simply gross domestic product, a poverty line set at 10% of per capita income will require at least 10% of GDP to be collected and distributed.
Since India’s per capita income is Rs 93,000, 10% works out to Rs 9,300 per person per year – not a very large sum. However, collecting 10% of GDP through new taxes would be quite difficult. Cutting existing expenditure to make space for a basic income would probably be just as tough.
The Alaska example
Alaska follows a different model of universal basic income. The US state owns large tracts of lands and the associated mineral rights. Oil has been extracted from these lands since the 1970s. Cash received from miners in exchange for the oil is saved in an asset, the Alaska Permanent Fund. This is essentially a large endowment fund with an important proviso – reinvestment up to inflation to keep the real value of the principal permanent.
Over 50 such funds exist worldwide, the oldest dating back to 1876 in Texas.
Since the minerals are a commons, belonging to an entire community, so is the fund, which is held by the state as trustee for the people and future generations. An income, or citizen’s dividend, is distributed to all Alaskans from the fund after inflation calculations. Income from the fund has risen steadily as the corpus has grown. Today, it is greater than the government receipts from oil.
Since the citizen’s dividend flows from the right of ownership over a commons, it is acceptable to all, backed by politicians and the financial sector, too, as this large pool of extremely long-term funds is ideal for infrastructure financing.
Such a citizen’s dividend would initially be far below the poverty line. If one targets a basic income of 10% of per capita income (equivalent to 10% of GDP), and the permanent fund earns a 3% real return, the corpus of the fund would need to be 333% of GDP. As minerals are extracted, the corpus will grow, as will the citizen’s dividend.
The Goa fund
The exact contours of Goa’s permanent fund are still in contention. The state government was to draw up a scheme that would be approved by the Supreme Court. The court has already rejected the first two drafts, the last one in January. A third draft is now up for consideration in late November. Unfortunately, the Goa government continues to design schemes that will effectively make it a giant slush fund. In fact, they want the permanent fund to have a life of just 20 years.
The Goenchi Mati Movement, a people’s movement, is asking for the exact opposite. It has argued that since minerals are a commons and an inherited asset, the full value of the minerals must be made available to future generations. It has, therefore, recommended zero-loss mining, which means that every paisa received for the mineral must be saved in the permanent fund and any real income be distributed only as a citizen’s dividend.
Mining was banned in Goa in 2012 amid allegations of widespread illegalities, leading to the case in the Supreme Court. The ban was lifted only recently in September last year. Despite the long stoppage period, the Goa Iron Ore Permanent Fund already has a corpus of Rs 100 crores.
Goa Foundation wants the state to recover the amount due from the last five years of mining, which the apex court has termed illegal, and deposit it in the fund.
This is the first such permanent fund in India. Will Goa also have the first true universal basic income in India?
The writer is a member of the Goenchi Mati Movement, Goa Foundation, India Network for Basic Income and Mines, Minerals & People.