‘Spending on people always is productive spending’

Civil Society News, New Delhi

POLITICAL parties have been trying to outdo one another at election time in promising free benefits to people. There has been criticism that this largesse is purely in search of votes. Frenzied giveaways in the heat of the moment risk being too much of a burden when ensconced in office. Free electricity, for instance, has imperiled the finances of more than one state and thrown utilities off-balance.

On the other hand, subsidies come with their benefits. Social spending helps people along when adequate employment is not available or income disparities are stark. Finally, the advantage goes to the economy as a whole. Free bus rides not only make it easier for women to get to work, they also get to save up the fare money and use it for other things. Ditto for free or subsidized cooking gas cylinders which have the added benefit of being clean fuel.

Most beneficial of all are direct transfers of cash into women’s bank accounts. The women have been found to squirrel even small amounts into significant savings and put them to productive use as they consider necessary.

To better understand the good that can accrue from what has come to be disparagingly called freebies, we spoke to Renana Jhabvala. Her work with the Self-Employed Women's Association (SEWA) and field studies have given her a deep understanding of how cash transfers benefit people by empowering them to spend on what matters most in their lives.   

 

Q: There has been considerable criticism of so-called freebies given out at election time to women like the Ladli Yojana scheme and free bus rides. Economists say that this diverts resources from more essential spending like on infrastructure. What is your opinion?

I would like to talk on the idea of giving cash to women. One has to look at the income structure in our country. What you find is that less than 50 percent of the people are earning enough to really live on. In the earlier days, when poverty estimations were carried out, it was only about food, basically.

 

 

What does poverty mean today? It means you can’t send your child to school because of the expenses you would incur. Even when the school is free, money has to be spent on uniforms, books, transport. Then, electricity and water. You absolutely need those today.

If you look at people’s earning power you find most people, and women of course, are not earning minimum wages. Work is precarious. You may have work only some days in a week. So, the kind of earnings that you have are unable to support what is regarded today as your basic minimum needs.

The income inequality we have is humongous and it is the duty of the government to provide some kind of security umbrella. What form should that social spending take? That is the issue.

While the government spends on health and education, water and sanitation, everyone agrees it is not enough. Beyond that it has been accepted that some form of help is necessary because incomes are too low and that help is income enhancement — whether income enhancement is in the form of a certain amount of subsidized food, or certain types of loans, etc.

Income enhancement has always been accepted and should be accepted. It’s a safety net for people who are earning less income. 

 

Q: What should income enhancements be?

MGNREGA, an employment enhancement scheme, is there. There is food enhancement. Beyond that there are all kinds of schemes, scholarships, old age pensions…. Many of them don’t reach the people. Not all are suitable today. Our economy is a purely monetary economy. Rather than getting this benefit or that they need income enhancement which allows them to access whatever they have been deprived of, and that can only be money.

We did this experiment in cash transfers many years ago. We found that people used their income enhancement cash very well, often bringing themselves out of poverty. They spent on health. Of course they spent on food. And they spent on assets that brought in an income. This was a rural area, so they spent mainly on pumps or livestock.

We have been advocating that instead of having multiple poverty alleviation schemes, why don’t we just have one direct income enhancement scheme?  Arvind Subramaniam, former chief economic adviser, in his Economic Survey of 2017, has a whole chapter on basic income.

He had advocated that there should be a basic income and it should go to women because then it goes directly to the family. Rather than inclusion criteria, there should be exclusion criteria, so you exclude certain large numbers of people.

Subsequently, a number of states started it in a small way and found that the uptake was very good. Of course, now there are many states which are doing income transfers to women. 

There are two studies on income transfer which have come out. One is on Tamil Nadu’s income transfer scheme and there’s an earlier one on West Bengal. I was informed that one on Karnataka will be out soon. In Tamil Nadu, income enhancement has also helped in gender strengthening. It has done very well.

I mean, this argument that money which has gone to women could have been instead spent on building five roads is a sterile one. In that case, the tax benefits you have given to companies could have gone into building 10 roads. It needs to be a far more sophisticated argument about where we are giving.

I think there is no question that social spending or spending on people has always proved to be productive spending.

 

Q: But should we be addressing this at random in election manifestoes? Does that have a deleterious effect? Or should we be addressing this much more systemically?

What is a narrow political gain? It just means that you’re doing something that people like because it’s benefiting them and, therefore, they will vote for you.

Everything is politics. How do you separate politics from economics? I believe a universal basic income is needed.

We should be addressing it much more systemically, but have we ever addressed anything much more systemically? Most things we do is in response to what is beneficial politically.

 I have often found that politicians are closer to people and their needs and respond to them compared to bureaucrats. We do know it’s the bureaucrats who will think systematically and they’ll consult economists. (But) I have found that most schemes get distorted because of bureaucracy. So, if it’s the politicians who are driving it, I actually see it as a positive step.

I agree we should have a much better system where everybody sits together, the experts are called in, we look at the data and then we decide that this is better than that. We don’t have that system.

 

Q: But you would support a basic income scheme instead of multiple schemes for people who need that income: a proper basic income that can be worked out which governments should give to women? 

I would definitely support it. We need to discuss and think about those who need it. Most schemes have inclusion criteria. Ration cards, for instance, used to have that kind of measuring. It has been done away with because the inclusion criteria were extreme in income and extremely difficult to test. Some inclusion criteria for certain types of schemes are easy. Either a woman is pregnant or not pregnant. She has a baby or she doesn’t have a baby.  

But what is your income? Is it good enough? Do you need income enhancement? Income testing is a very, very difficult thing to do especially in a country like India where incomes are precarious. So, I would say, there should be a basic income. Everybody should get it. But how much? What can we afford? What other schemes should be cut? All those things really need to be experimented with. The trouble is that we’re not willing to cut schemes. You have these schemes on paper, money is allocated to them, and the bureaucracy is associated with them. People are getting salaries, you know.

 

Q: When we talk of increasing the income of women, the question that comes up is the weak participation of women in the workforce. SEWA has deep experience in this. How do you motivate women to join the workforce? How do you help them become entrepreneurial? How do you create jobs for them?

First, let me say that I don’t believe that there is such weak participation of women in the workforce as shown in the NSSO (National Sample Survey Office) figures, at least till five years ago. The numbers have suddenly shot up and nobody knows why. And I honestly don’t believe that they have shot up in any way whatsoever. But the type of statistics we have been getting do not measure many kinds of work that women do, which should, by the NSSO’s own definition, be included.

There have been many smaller studies which compare what NSSO measures about women’s participation. If you actually ask more probing questions, you get different answers.

About a decade ago we did a study in Bihar. They had this ridiculous figure of women’s participation being 10 percent. You go to rural areas in Bihar and you see women working all over the place.

We used the same criteria as the NSSO in villages. We had hired out the study to the Institute for Human Development. And it showed close to 51 percent female participation in the workforce. Where was the difference? If you asked a woman, she said she did not work. Because they don’t see their work as employment. If you’re a landless labourer and you’re working in somebody’s field, then, yes, you’re getting a wage of some type. Then you would see yourself as working.

But those who work in their own fields did not see themselves as working. If you’re a man, then you are counted. But if you’re a woman, you’re not counted. The woman will say she doesn’t do anything. The second reason is if a woman works on livestock, she doesn’t necessarily work eight hours a day. Perhaps she works six hours or four hours, two hours in the morning and then in the evening she milks the cow again.

All the livestock work that women were doing was not being counted. Thirdly, a lot of women do home-based work like stitching, cleaning all kinds of vegetables and packing them. And, oddly enough, another study found that even women who undertook domestic work did not say they worked as domestic workers.

Unless you’re sort of in the formal sector, and getting a clear wage, you are not counted. They keep stating there is weak participation of women. It’s actually a lack of counting.

Also, these types of work earn dismal incomes, so the women become invisible. In a sense, they are in the workforce, they are adding to the GDP, but their returns are near-zero.

From a different angle, education levels of women have gone up in the past 20 years. More girls have completed secondary school, and college. They are not keen to work in the informal sector. There’s no real bridge to help them cross over to the formal sector.

 

 

It’s the same with young men. If you look at the unemployment rates of young men in some states, it’s terrible, but so is the unemployment rate of young women.

One of the things we have been trying to do is create those bridges where it is possible. Help girls with a certain minimal education become more compatible for the workforce.

There are women who are doing home-based work, and that’s a very large number, women who are small producers and have the capability of becoming small entrepreneurs. But they struggle because of lack of recognition, lack of finance, of formalization, of reaching larger markets. These are all areas where attention can be given.

 

Q: How do you create an enabling environment? Isn’t creating collectives the answer? 

We have been creating collectives for a long time. What we find is that as long as the collective remains very small, and doesn’t formalize, women are able to run it very well.

But as the collective grows, there are a number of things that happen. I’m saying this from experience rather than as fact. What we found is that either they don’t grow anymore or they fall apart at some point.

We have created women’s enterprise support systems. We feel that when a collective formalizes, it becomes a totally different type of entity. It’s no longer possible for those women, unless they have a certain level of education, to run such a collective. Therefore, they need some professional management. It can come from amongst them because, as I said, girls are getting educated and young men too. But they do need a lot of hand-holding and support.

One of the major things is the kind of compliances you have to undertake when you get formalized. For a group of women who’ve always been in the informal sector to suddenly face GST, income tax, licences, reporting requirements…it’s a whole list of things…they don’t really know how to handle it all. A lot of hand-holding is needed. If that is done, I think, collectives can become very successful.

 

Q: But who is going to do that kind of hand-holding?

That’s the question. I think government, you know, put a lot of money into forming Self-Help Groups (SHGs). Why is nobody calling that a freebie? Money went into supporting them, subsidizing their loans, etc. That was considered good. If the right things are done, it’s certainly possible that collectives can be helped. But, you know, there are a lot of very small entrepreneurs who can be helped directly.

 

Q: Should financial planning be taught to women at school level?

I must tell you, if you have examined the SHGs, quite a lot of good training on how to manage group finance has been done. There are, on average, two or three women who become very sophisticated at that.

 

Q: Coming back to basic income, do you see it as a base on which more can be built?

 In 2012 we were the only ones talking about basic income. Maybe there were a few other academics. Then Arvind Subramaniam took it up in the Economic Survey in 2017. Interestingly, now there are a lot of younger professionals who have started examining it. What kind of basic income should there be? What should be the inclusion criteria? Should there be exclusion?

It’s a good development. It has come into the political sphere, even if money is simply being transferred. An India Basic Income Coalition has come up. A number of young professionals are doing experiments and discussing this issue with policymakers.

 

Q: Industry complains about how low rural consumption prevents it from investing.

Actually, low-income consumption is not confined to rural areas. It’s also a facet of urban India. Low consumption is because of low incomes. And a very precarious employment situation.

 

Q: Is increasing income going to be critical? 

You know, it’s not just employment enhancement. You also need income enhancement. Obviously, it would be best if it came through employment and then you need not do a higher income enhancement. But then, why are we not able to increase employment? Employment opportunities just don’t exist.