The hidden agenda of Universal Basic Income

G. Sampath

The idea of a universal basic income (UBI) has been gaining ground globally. While Switzerland held a referendum on it last year (it was voted down), Finland introduced it earlier this month. Media reports suggest that the government of India’s flagship Economic Survey this year is likely to endorse the UBI, setting the stage for its introduction.

 
On the face of it, an unconditional basic income for everyone seems a great idea. In the West, the UBI is being discussed as a solution to two problems: unemployment due to automation; and growing social unrest caused by extreme inequality and precarity. It is expected to solve the unemployment problem by decoupling subsistence from jobs, freeing human beings to realise their true potential, preferably through entrepreneurship. It would address the second by supplying monetary resources to access the necessities of life. This, in a nutshell, is the popular understanding of the UBI. The reality, however, is not so rosy.

The UBI debate in India has been a narrow one — restricted, for the most part, to financial viability. Its advocates argue that it is a more efficient way of delivering welfare, while its opponents hold that the fiscal burden would be too much. What hasn’t received adequate attention is the politics behind the UBI: who is pushing the idea? To what end? And why?

The UBI evangelists
The most eloquent advocates of UBI today are free-market enthusiasts — the same lot branded as neo-liberals for their advocacy of deregulation, privatisation, and cuts in welfare spending. Their guru, Milton Friedman, was an early advocate of basic income. Outside the academic realm, the biggest champion of UBI is the global tech sector. Silicon Valley billionaires such as Elon Musk, the founder of Tesla Motors, and Facebook co-founder Chris Hughes have publicly backed the idea.

Could it be possible that the global financial elite have finally sprouted a conscience? The reports of the UBI pilot projects conducted so far offer a clue. Invariably, they all present the same conclusion: giving cash to the poor is better than traditional welfare.

Of course, it would be wonderful if the problem of inequality and poverty were solved for us by a sudden moral awakening of the rich. Unfortunately, the current enthusiasm for the UBI is not the product of such a momentous development.


Not an add-on benefit
The biggest myth about the UBI, partly responsible for sections of the Left endorsing it, is that it is a redistributive policy that would reduce inequality. It is indeed possible to have a redistributive UBI. But it would need to fulfil two conditions: it must be funded by taxing the wealthy; and the existing entitlements to the poor must not be taken away. Such a UBI would actually be a socialist measure that would increase the bargaining power of the working classes by giving them an income cushion.

But neither of these conditions is met by any of the UBI designs being promoted today, either globally or in India. The much-touted Finnish experiment is restricted to the unemployed. It does not cover all working individuals. And it only replaces the already existing basic unemployment allowance and labour market subsidy — it is not an add-on benefit.

In India, too, the UBI is not an add-on. On the contrary, it is about giving in a different form (cash), and under one umbrella, what is already being given (in-kind and cash benefits) via different channels.

Back in 2008, in an influential paper in the Economic and Political Weekly titled ‘The case for direct cash transfers to the poor’, Arvind Subramanian, the present Chief Economic Adviser of the government, along with economists Devesh Kapur and Partha Mukhopadhyay, argued that the ₹1,80,000 crore spent annually on centrally sponsored schemes and assorted subsidies should instead be distributed as cash directly to 70 million households below the poverty line. Put simply, the UBI in India is nothing but the old wine of direct cash transfer in a fancy new bottle.

Its objective remains the same: to eliminate the public distribution system (PDS) and with it, the food, fuel, and fertiliser subsidies. The same old arguments for replacing the PDS with cash transfers are now being trotted out in favour of the UBI. The addition of the word ‘universal’ signals greater ambition but alters neither the substance nor the motive.

But let us take the arguments in favour at face value. What constitutes a basic income? Common sense dictates that it should be whatever is required to take care of basic life needs. A logical equivalent for this figure would be the minimum wage. The central government’s move last year to raise the minimum wage for non-skilled, non-agricultural workers to ₹9,100 per month was set aside following opposition from industry. Perhaps ₹9,100 per month is too luxurious an income to qualify as ‘basic’. The actual minimum wage in India is around ₹4,800 per month. Could we then expect at least this amount from our UBI?

While different numbers have been bandied about, there seems to be a broad consensus around the Tendulkar committee poverty line of ₹33 a day. This works out to a basic income of ₹1,000-₹1,250 a month or ₹12,000-₹15,000 a year. But even this modest figure is estimated to cost 11-12% of the GDP. In contrast, all the government’s subsidies put together account for only 4-4.5% of the GDP. This presents three options: one, the government makes up the deficit through additional tax revenue; two, it limits the fiscal burden by shrinking the UBI coverage from ‘universal’ to those below the poverty line; and three, it further shrinks the amount being doled out.

Given India’s narrow tax base, and a policy mindset hostile to the idea of extracting more tax revenue from the wealthy, we can rule out option one. So the UBI we get, if we get one, would be derived from a combination of the second and third options, which means both ‘U’ and ‘B’ are out of UBI, leaving us effectively with what we already have: cash transfers.

Most critically, one aspect is taken for granted by all the three options: the UBI will be funded primarily by the money allocated for CSS and subsidies. In other words, a basic income, however paltry, would help strengthen the case for the elimination or a significant roll-back of programmes such as the PDS, midday meal schemes, and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).


Why a UBI now?
There is no point reprising here the case against direct cash transfers, which economists such as Jean Dreze have made convincingly. It is nonetheless fascinating to see the emerging contours of a distinctive political project.

The Jan-Dhan Yojana set out to make every Indian accessible to global finance. The Aadhaar card set out to make every Indian identifiable and enumerable as data — the currency of global tech. The high mobile penetration has connected every Indian to the global digital network. An element that was missing was consumer behaviour, which the recent demonetisation sought to address, by force-feeding ‘cashless’ to a cash-dependent population. The UBI fits perfectly in this scheme of things, as it seeks to compress the whole gamut of welfare benefits into one, and mount it on a singular JAM (Jan-Dhan, Aadhaar, Mobile) platform.

But why a UBI now? One explanation could be the immense pressure on India in secretive free trade negotiations. The developed nations have for long wanted India to wind up its food security-related provisions — both state procurement of foodgrains, and their subsidised distribution via PDS. A UBI would pave the way for the elimination of these measures, dealing a death blow to food security and deepening farm distress.

Another is that the Indian state is stuck with welfare commitments it cannot renege on without political and legal consequences. The efficiency/inefficiency argument for scraping PDS and MGNREGS never acknowledges that these are rights-based social entitlements with specified outcomes — and that is not accidental. Shifting the welfare paradigm to UBI would loosen the bonds of legal and social accountability. Under the PDS, for instance, the state must provide a specified quantity of foodgrains to the poor no matter what. With UBI, it has the option letting the payout slide behind inflation, as has already happened with the old age and widow pensions.

In the final analysis, we need to answer a simple question: is the UBI about reducing inequality and poverty? If the answer is yes, then there are many things the state could do at a fraction of what the UBI would cost — from enforcing the minimum wage law, to releasing funds on time for MGNREGS. But if a dispensation hostile to these tried and tested anti-poverty measures develops a sudden zeal to eliminate poverty through UBI, a measure of scepticism is in order.

A new index to measure social progress

K. Srinath Reddy 

Is Gross Domestic Product (GDP) an adequate measure of a country’s development across many dimensions? This has been debated vigorously in recent years. The discontent with GDP stems from the fact that it focusses exclusively on economic growth. Even there, it does not capture the level of inequity which can exist in a society despite overall economic growth. The inequity can in fact even be exacerbated by it. More importantly, it pays no attention to the social and environmental measures of development which are as important as economic development. Indeed, the United Nations has identified three pillars on which the post- 2015 Sustainable Development Goals (SDGs) must rest: economic, social and environmental. 

Alternate measures
Several alternative measures have been proposed to capture the social dimension of development, combined with or independent of economic indices. Bhutan has embraced and espoused the concept of Gross National Happiness. A World Happiness Report is now periodically published from the Columbia University which compares self-reported levels of happiness of people from different countries. A composite Wellness Index was proposed by noted economists Stiglitz, Sen and Fitoussi in response to a request from the then President of France, Nicolas Sarkozy, for a measure of development that looks beyond GDP. A Global Multidimensional Poverty Index was developed at Oxford to gauge inequity within and across societies.

However, none of these has really caught on because economists, industrialists and politicians alike are conditioned to place a high premium on economic development as the measure of progress and do not like to see the clarity of a single measure like GDP cluttered by a host of other indicators they view as imprecise or even irrelevant. So, an index of social progress is needed which does not try to displace GDP (not yet anyway) but has additive value. Such an index can be used to remind political leaders that their bifocal vision must accommodate both economic and social progress as being important for a country, recognising, of course, that these two tracks are closely interlinked and sometimes inseparable.

Such an index of social progress has recently been created by a group of academics and institutions constituting the Social Progress Imperative (www.socialprogressimperative.org). This index has three major domains: Basic Human Needs, Foundations of Wellbeing and Opportunity. Each of these has several clusters of specific indicators (as shown in the table).

The environmental dimension is partly incorporated into the Social Progress Index (SPI) as a cluster of indicators related to ecosystem sustainability. While there can be debates on which other indicators could have been included in any of the clusters, the SPI does provide a list of key areas which need to be tracked and acted upon to ensure a higher level of social progress. The index is still evolving, with validation studies being conducted on data from different countries. The authors have extended an open invitation to groups from anywhere in the world to use their data sets for validation and suggest refinements.

The designers of this index draw our attention to three overarching findings of their study so far: social progress is distinct from economic development, though correlated with it; some aspects of social progress are more closely related to the level of economic development than others; countries have relative strengths and weaknesses in social progress, both across the major dimensions and across components within the dimensions.

Of the three domains, Basic Human Needs is best correlated with per capita GDP, Foundations of Wellbeing being intermediate and Opportunity the least so. However, in each domain there is variability in the degree of correlation between the individual components and per capita GDP. As the developers of SPI affirm, the index offers a new tool to explore the complex two-way relationship between economic and social progress. At the same time, it provides a metric for comparison of countries, and States within a country. 

Inter-country comparisons
In inter-country comparisons, the top three countries were New Zealand, Switzerland and Iceland. Not surprisingly, Netherlands, Norway, Sweden, Finland and Denmark feature in the top 10. India scored lower than the other four from the BRICS group because of lags in areas such as water, sanitation and access to higher education. In specific indicators, there is variability across these countries. For example, China lags in personal rights and Brazil in personal safety. Costa Rica has an SPI close to that of far richer countries like Spain and Italy. Costa Rica’s outstanding health status and access to education may be related to investment priorities (it has no defence budget) and social harmony. For the present, India need not concern itself with comparisons with other countries or even debate on how accurately the individual components of the index measure social progress. It would help if the SPI indicators serve as a checklist to monitor our progress over time in each of these important areas of human welfare.

Even as the country commits itself to move on the fast track of economic growth, it must be mindful of the need to invest in improving the social indicators as well. We may continue to measure GDP if that is still considered the talisman of economic progress by the worlds of politics and finance, but we must also simultaneously measure social progress lest we end up as a soulless society characterised by gaping inequality and glaring social backwardness despite gaining wealth. Let GDP and SPI be the inseparable Gemini twins that herald our ascent to higher levels of balanced development.

(K. Srinath Reddy is president, Public Health Foundation of India. The views expressed are personal.)

Environment and Development

Ramaswamy R Iyer
There are some worrying signals from the new government in New Delhi that it could compromise on environmental concerns in the pursuit of more rapid growth: clearances could be given quickly (i e, environment protection requirements will be loosened), the Land Acquisition Act could be diluted and more.
It may be more useful if we shake ourselves free of the obsession with GDP growth rates and try instead to make India a caring, humane, compassionate, equitable, just and harmonious society.

With the advent of the Narendra Modi government, there is much talk of a quick approval of projects held up for environmental clearances. The big corporates, their champions among the economists, and those who believe that gross domestic product (GDP) growth and “development” ought to be our over-riding goals, are convinced that among the impediments to growth and development “green clearances” are the worst.

One View of ‘Clearances’

Let me present a caricature of a particular view: project clearances should be had for the asking; similarly land for industry should be had for the asking and should be taken by the government from farmers and other people and handed over to corporate houses (whether for high or low priority industries or for speculative investments in real estate). “Free, informed prior consent” for land acquisition, fair compensation for land acquired, and generous rehabilitation packages are luxuries that we cannot afford. “Social Impact Assessment” or SIA is a newfangled and dangerous idea. The society that we should aim at building is one in which the stock market soars to ever new heights and foreign investors want to invest: that is the ultimate test of success. This is in fact not too much of a caricature of the industry view and of neo-liberal alliance economic thinking. It carried much weight with the United Progressive Alliance (UPA) government – but not, one hopes, with the new government.

Unfortunately, there seems to be a strong continuity between the erstwhile UPA government and the new Bharatiya Janata Party government on an impatience with environmental concerns. The redoubtable Sunita Narain is reported to have said that what we need is not rhetoric but tough action on the environment. Tough action is very likely, but alas, not necessarily in the direction that we would approve of.

Returning to project clearances, please note that the focus is on “projects”. However, projects are only the embodiments of approaches and policies. When a new government comes into power, one would expect it to examine the approaches and policies – the kind of thinking – underlying the pending projects, and consider whether it wishes to persist with that thinking or would like to bring new thinking to bear on the matter. In the latter case, it may wish to abandon some projects, redesign some and push ahead with some. Instead, the call is to “clear pending projects quickly”. This unthinking preoccupation with projects prevents serious thinking about policies.

Further, any requirement of a clearance implies the possibility of a denial of clearance, but no one is talking about rejections. Let us suppose that the examination of projects and the processes of decision-making are speeded up, and that out of 10 projects six are promptly rejected and four are promptly cleared. Would the corporate world and the protagonists of development be happy? Hardly. When they talk about “quick clearances” they mean positive clearances, not negative ones. What they want is that the whole business of a clearance under the Environment (Protection) Act (EPA) and related Acts should be reduced to a formality to be got through very quickly, and that all projects should come through unscathed.

At the Cost of the Environment?

There used to be complaints about delays in clearance even earlier, when the examination was confined to techno-economic and financial aspects, but with the onset of what are called “green clearances”, i e, clearances under the EPA, the Forest Conservation Act, and other related enactments, the complaints have become shriller. The reason is that project proponents were willing to accept the need for a techno-economic-financial examination, but resent an environmental clearance as a needless imposition. Concern about the environment and ecology is limited to a small number of people. Most people are willing to pay lip service to the environment because that has become the prevailing practice, but have no real belief in it, and would be seriously upset if it interferes with what they consider to be development. That is also the attitude of big business, and this point of view is quite strong in the so-called “developmental” ministries in the government. The Ministry of Environment and Forests (MoEF) is unpopular with these ministries; it is regarded as a “negative” force impeding development. A development-environment dichotomy is posited, with the former being accorded primacy and the latter relegated to a secondary position. The holders of the “primacy of development” argument would say “yes, the protection of the environment is important, but not at the cost of development”. Let us reverse that proposition: can we really have development at the cost of the environment?

It is interesting that the ardent advocates of what they call “reform” (which means a full changeover to free-market capitalism) sometimes describe “green clearances” as a return to the discredited “licence-permit raj”. As no one is currently in favour of licence-permit raj, the use of that term functions as an argument-stopper. However, can any government function without permits and licences? A passport is a permit. A driving licence is a licence. Boilers have to be periodically certified for safety. Building plans cannot be passed without a clearance from the fire department. Vehicle exhaust has to conform to certain specifications. In that haven of free enterprise, the United States, there is strong anti-trust legislation and there are powerful regulatory agencies such as the Securities and Exchange Commission and the Federal Drugs Administration. In that country, dams can be built by private agencies but they need a licence; and if the conditions prescribed are not adhered to, the licence can be cancelled. It follows that if we wish to protect and conserve mountains, forests, rivers, wildlife, the air that we breathe and the water that we drink, and indeed our habitat, the Planet Earth, we must have laws and rules and these must be enforced. Large interventions in nature will necessarily have to be carefully examined for their impacts on these things. Describing this kind of examination dismissively as licence-permit raj indicates a mind disabled by ideological prejudice.

Disturbing Signals

Dare one hope that the negative attitude to environmental concerns will not continue in the new government? Unfortunately there are disturbing indications. The new environment minister is reported to have said that the environment ministry will not be obstructionist. That is a revealing statement. It implies that any minister who implements the EPA faithfully and effectively is being obstructionist and that he or she should moderate the implementation to avoid being so. It is also a defensive statement seeking to reassure everyone that he will try not to give trouble to anyone.

Why does such a reassurance become necessary? The reason is that the EPA seriously tries to protect the environment and contains provisions for the purpose, which means that if rigorously implemented, the Act is bound to bite in some cases. If it did not, the Act would be worthless. It follows that the bland statement often heard that there need be no conflict between the environment and development is not true. An effort needs to be made to reconcile the requirements of the Act and the demands of development, and it will not be an easy effort.

Compromise on the Environment

It is in that context that the advocates of development glibly talk about a “balancing” of environment and development. What they mean by balancing is of course a compromise on environmental concerns, never a moderation of developmental activities. The development chariot must roll on, and environmental concerns must be sacrificed.

There are reports that time limits will be set for environmental clearances, and that there might be a provision for an automatic clearance if the clearance is not forthcoming within a certain period. These are of course media reports and one does not know what the exact instructions will be. However, these indications show which way the wind is blowing and that is indeed worrisome. Please note that the onus is entirely on the MoEF. They are responsible for delays; they must abide by the time limits; if they do not, there may be clearances by default. What responsibilities are cast on those who submit for clearance projects which are simply not fit for clearance? Is there any recognition that the projects must be well-prepared, fully documented and supported, and ripe for a clearance in every possible way; that the vast majority of Environmental Impact Assessments (EIAs) are extremely poor and shoddy and many downright dishonest; and that EIAs need to be fully professionalised, distanced from project formulators, approvers and implementers, and placed under the supervision of the National Environmental Regulator (if one is established)? That is a rhetorical question that needs no answer. Under the circumstances, the only way in which the MoEF can abide by the time limits would be to reject promptly the vast majority of projects. Would that be acceptable?

Dilution of Land Acquisition Act

Another source of worry is in relation to land acquisition, displacement and rehabilitation. There is a tendency on the part of many commentators, particularly the champions of free-market capitalism (who hold a view similar to the old American slogan that “what is good for General Motors is good for America”), to regard the Land Acquisition and Rehabilitation Act of 2013 as extremely bad and a serious impediment to development. The thought that a national policy was needed on development-induced displacement and the rehabilitation of project-affected people, as also a drastic overhaul of the colonial Land Acquisition Act, emerged in the 1980s. After protracted debates and a series of drafts (repeatedly diluted), a weak Act was finally passed in 2013. Many feel that it is defective and deficient in several respects, but such as it is, it exists and offers some limited protection against unfair alienation of agricultural land, and a modest rehabilitation provision. In the drive for the quick implementation of “developmental” projects, one hopes that the government will not be unduly influenced by the neo-liberal economic view of this Act.

Going beyond project clearances, it has also been argued by some commentators that institutions of accountability such as the Comptroller and Auditor General (CAG) and institutions against corruption such as the Central Vigilance Commission (CVC) are responsible for the economic slowdown. The inference is clear. It would be wonderful if there were no CAG, no CVC, and no EPA, but if that ideal situation is not possible, we should at least render these agencies, laws and procedures as weak and innocuous as possible. Corruption, fraud and financial irregularities are no doubt regrettable, but reporting on them in detail in public documents such as the CVC’s or CAG’s reports makes them visible internationally and affects “investor confidence”. A bit of corruption, fraud or irregularity is a price we may have to pay for a better inflow of foreign direct investment (FDI). These things will exist, but must be hidden from public view. That represents the thinking of several commentators, though they may not say so explicitly. That view found much resonance in the UPA government. One must hope that it does not find an echo in the new government through some of its advisers. Prime Minister Modi is probably too shrewd a person to be unduly influenced by that kind of thinking.

Reports to the effect that the new government proposes to restore the Ganga to a pristine condition are encouraging, but one must hope that it will not be a cosmetic exercise like the “revival” of the Sabarmati in Gujarat. The Sabarmati has not been revived; it is as dead as ever. All that has happened is that in a 10 km stretch of the 370 km-long river, Narmada waters have been put in, treating the Sabarmati bed as a conduit or a pipeline for those waters. An artificial “river” of 10 km has thus been created for the city of Ahmedabad. The only lesson to be learnt from that experience is that it should be avoided.

River Interlinking Project

More disturbing is the fact during his election campaign, the present prime minister talked about the interlinking of rivers (ILR) project. That is a very controversial project which has many supporters but also many critics. The fact that the prime minister is predisposed in favour of the project is hardly reassuring, but one fervently hopes that he will study the weighty objections that many critics have raised before taking a decision on the project. The ILR project is an ill-conceived project and will be an unmitigated disaster. However, that subject cannot be discussed in this article. The reader’s attention is drawn to two articles by this writer on the subject in EPW (“River Linking Project: A Disquieting Judgment”, 7 April 2012; and “Linking of Rivers: Judicial Activism or Error?”, 16 November 2002).

Perhaps one is being unduly alarmist. One hopes that the Modi government will be as earnest about environmental and ecological concerns as about what goes by the name of development. One hopes further that there will be an agonising reappraisal of what constitutes true development. A word needs to be said about this.

As already mentioned, the prevailing idea of development is a booming stock market, an inward rush of foreign investment, and a GDP growth of 8% to 10%. However, 8% or 10% growth would imply a huge draft on natural resources, a high potential for pollution requiring remedial measures, and an immense generation of waste needing disposal. Is it possible to pursue 8% or 10% growth without damaging the environment and Planet Earth? However, let us leave such radical thinking aside for the time being, though we may be forced to face that logic in due course. In practical terms, what can be done?

Need for Focus on Specifics

May one suggest that we refrain from adopting targets for growth, and focus instead on specifics such as food inflation, farmers’ suicides, poverty, jobs, illiteracy, disease, infant mortality, safe and reliable water supply, appropriate sanitation arrangements, safety of women in the streets and workplaces, and so on, and above all corruption, leaving growth to look after itself. This is a subject that will need to be discussed at length. One can only offer without proof the statement that such a piecemeal approach is possible without adopting ideologies of the right or the left. In particular, it is necessary to shake ourselves free of the obsession with GDP growth rates. It is also necessary to stop being bemused by visions of India as a super-power, and try to make India a caring, humane, compassionate, equitable, just and harmonious society.

One shares the widespread hope that a single-party majority and a decisive prime minister will mark a new beginning. The prime minister’s statement from his new website says: “Let us together dream of a strong, developed and inclusive India”. That phrase needs to be expanded to include ecological sustainability and harmony – not only between groups/states/countries, but also between generations, and between humanity and Nature. In the hope that the new government is engaged in serious thinking about these matters, these reflections are offered to it for whatever they are worth.

(Ramaswamy R Iyer (ramaswamy.iyer@gmail.com) is with the Centre for Policy Research and is better known for his extensive writings on issues related to water.)

A flaw in the CSR design

Tulsi Jayakumar

Corporates can undertake social spending only where they are invested. The benefits go to already industrialised regions

Section 135 of the Companies Act 2013 and the resultant Corporate Social Responsibility (CSR) rules 2014, issued by the ministry of corporate affairs came into effect in April 2014. The activities listed which may be included by companies in their CSR policies appear ‘confusing’.

They include eradicating hunger and poverty, promoting education, promoting gender equality and empowering women, reducing child mortality and improving maternal health, and combating HIV virus, AIDS, malaria and other diseases.

For one, these activities are traditionally supposed to be undertaken by a welfare state. Is this then an admission of the Government’s abrogation of responsibility?

It has been argued by some economists that such CSR spends are a drop in the ocean of overall government spending on the social sector. The question is: Can this make a difference to the provision of essentially public goods that the Government has so far not delivered?

A more disturbing aspect of Section 135 relates to the linking of a company’s profit-making with the development of local areas.

Companies are required to spend 2 per cent of their average net profits in the preceding three years and focus on local areas, around which they operate. This is an absurd proposition.

Local development 
This would increase inter-state disparities in social indicators. For instance, states like Gujarat, Maharashtra and Andhra Pradesh (as also Odisha in 2013), with their large number of industrial proposals, are likely to see greater social development on account of higher CSR spend by the private sector.

Odisha was the most attractive state for investment in 2013. It accounted for over one-fifth of project proposals in the first 10 months, valued cumulatively at ₹4.7 lakh crore, according to data from the department of industrial policy and promotion (DIPP).

Of the 30 districts in Odisha, the three relatively more developed districts of Ganjam, Jajpur and Jagatsinghpur, which attracted the largest investors, already have an industrial presence. With literacy rates of 81, 80 and 87 per cent respectively, their development indicators were better.

On the other hand, a ministry of home affairs (MHA) report identifies six districts as Naxal-affected. The most backward — Malkangiri — with a literacy rate of 49 per cent and almost 80 per cent of the population belonging to the SC/ST communities, is not likely to attract investments. What hope is there for communities in such districts?

Dealing with losses
What happens to development projects when companies make losses? According to an estimate, of the 5,138 firms listed on the BSE, the total number of companies qualifying under Section 135 has come down from 1,500 in FY2010 to 1,372 in FY2012. So has the number of total qualifying companies with Profit After Tax greater than zero — from 1,457 to 1,265.

While the total estimated CSR spend of such companies increased over the period (from ₹7,609 crore to ₹8,343 crore), such figures may be misleading. This macro-picture masks the reduced CSR spending on account of the companies concerned running losses.

Also, it is during recessionary times, when the need for such expenditure may be highest among vulnerable groups, that CSR spend may actually be unavailable.

Presently, most companies spend on projects relating to education, health and livelihood. These areas have synergies with business interests and sustainability. The rules in the Companies Act 2013 would make it difficult for companies to pursue strategic CSR — aligned to business strategy — since any expense which can be traced back to financial profits may have to be set aside for CSR as indicated by the law.

We may then see companies preferring to spend on activities specified in the Act which, however, may have a lower long-run social impact --- such as protection of national art, heritage and culture, promotion of sports, and contributing to the Prime Minister’s National Relief Fund. But what about addressing the problems of inter-regional inequality?

(The writer is a professor of economics at the SP Jain Institute of Management and Research, Mumbai.)

Against developmental fundamentalism

Ramaswamy R. Iyer

There is hope in the air: years of corruption, ‘policy paralysis’ and a non-functioning government are gone and there is a forceful, efficient, decisive leader at the helm. However, while joining in the national mood of hope and expectation, may one add a word of caution about the current emphasis on “quick project clearances”? The argument is that “green clearances” are responsible for delaying large projects and that the process should be made fast and easy.

Delays in project clearances can arise from several causes: plain inefficiency in the functioning of the clearance agency, poor project formulation necessitating a demand to reformulate the project, inadequate information necessitating a number of queries and demands for clarifications and additional material, a prolonged debate between the project proponents and the examining agency in those cases where a negative decision seems likely and so on. While delays caused by inefficiency can and should be eliminated, other delays are not really delays if they serve a useful purpose. The examination of projects that are likely to have serious environmental, social and human impacts, and demand heavy investments, cannot be rushed through. No more than the necessary time should be taken, but equally, not less than the necessary time must be taken. To cut that short would be to turn the entire clearance process into a mockery.

Giving clearances to projects
Why are “green clearances” in particular blamed for delays? The reason is that most project proponents and the ministries concerned regard a clearance under the Environment (Protection) Act a tiresome formality. The Ministry of Environment and Forests (MoEF) is unpopular with the so-called ‘developmental’ ministries; it is regarded as a ‘negative’ force that impedes ‘development.’ A development-environment dichotomy is posited, with the former being accorded primacy and the latter relegated to a secondary position.

The holders of the “primacy of development” argument would say: “The protection of the environment is important, but not at the cost of development.” Let us reverse that proposition: can we really have development at the cost of the environment? When we have destroyed all aquifers, turned all rivers into sewers, denuded all forests and reduced bio-diversity drastically, what development can there be? Faced with that question, the advocates of development might say: “Let us be moderate; let us not go overboard and become eco-fundamentalists.” What can be more basic than our habitat, our water and the air? Profound concern about them should not be deprecated as fundamentalism. What we have in fact had is developmental fundamentalism, accompanied by an angry impatience with environmental concerns.

Dare one hope that the negative attitude to environmental concerns will not continue in the new government? In the new government, the environment ministry is headed not by a Cabinet minister, but by a Minister of State with independent charge, Prakash Javadekar. He is reported to have said that the environment ministry will not be obstructionist. That is a revealing statement. It implies that any minister who implements the Environment (Protection) Act faithfully and effectively is being obstructionist and that he or she should moderate the implementation to avoid being so. It is also a defensive statement seeking to reassure everyone that he will try and not trouble anyone. Why does such a reassurance become necessary? The reason is that the Act seriously tries to protect the environment and contains provisions for the purpose, which means that if rigorously implemented, it is bound to bite in some cases. It follows that the bland statement often heard that there need be no conflict between the environment and development is not true. An effort needs to be made to reconcile the requirements of the Act and the demands of development, and it will not be an easy effort.

It is in that context that the advocates of development generally call for a ‘balancing’ of environment and development. ‘Balancing’ implies action on both sides, but in the ‘development versus environment’ debate, the demand is always for a compromise on environmental concerns, never for a moderation of developmental activities. However, perhaps one is being unduly alarmist. One hopes that the Modi government will be as earnest about environmental and ecological concerns as about what goes in the name of development. One also hopes that there will be an agonising reappraisal of what constitutes true development.

Another source of worry is in relation to land acquisition, displacement and rehabilitation. Many feel that the Rehabilitation Act of 2013 is deficient in several respects, but it offers some limited protection against unfair alienation of agricultural land, and a modest rehabilitation provision. In the drive for the quick implementation of ‘developmental’ projects, one hopes that the government will not be unduly influenced by the neoliberal economic view — that this act is a serious impediment to development. 

Restoring the Ganga
Reports to the effect that the new government proposes to restore the Ganga to its pristine condition are encouraging, but one must hope that it will not be a cosmetic exercise like the ‘revival’ of the Sabarmati in Gujarat. More disturbing is the fact that during his election campaign, the present Prime Minister talked about the Inter-Linking of Rivers Project, a controversial project. That the Prime Minister is predisposed in favour of the project is hardly reassuring, and one fervently hopes that he will study the weighty objections that many critics have raised before taking a decision on the project. It seems strange to want to restore the Ganga and at the same time undertake a project that will do great harm to several other rivers.

One shares the widespread hope that a single-party majority and a decisive Prime Minister will mark a new beginning. The Prime Minister’s statement — “Let us together dream of a strong, developed and inclusive India” — needs to be expanded to include ecological sustainability and harmony, not only between groups, States and countries, but also between humanity and Nature.

(Ramaswamy R. Iyer is a former Secretary, Water Resources, Government of India.)

Corporate Social Responsibility (CSR) as an anti-poverty instrument

Tony O. Elumelu

In 2000, the United Nations made the historic announcement of eight Millennium Development Goals (MDGs). They were very specific and had a timeline of 15 years for delivery. Progress on most of these objectives has been encouraging, but as we look towards the next round of development goals, we must recognise how the world has changed since 2000.

The global financial crisis had a devastating impact on both individuals and the public sector. Conversely, the rise of the BRIC economies and Africa’s emergence mean that aid is simply not needed on the same scale as it was before.

Therefore, we in the emerging economies need to reconsider not only the substance of the new development framework, but also the implementation process. In the original MDGs, the private sector was noticeable mostly by its absence. This time, we must step up as part of the solution and pioneer new approaches that could hold the key to a more innovative and inclusive way to deliver development.

Take, for example, India. While its economy has expanded impressively over the past decade and half, so has income inequality. Improvements on social indicators such as malnutrition and hunger have not kept pace with its growing prosperity, primarily because public spending to tackle these challenges was simply inadequate.

CSR – a game changer

But now the Indian government has introduced the first step of a potential gamechanger, and we in Africa have taken note. A new law enacted this month makes it mandatory for private corporations to invest at least 2 per cent of their profits in corporate social responsibility (CSR). The private sector in India now has a unique opportunity to respond to the collective aspirations of an entire country and accelerate action towards achieving the MDGs on hunger, health and sustainability. We applaud India for this.

My own group of companies also contributes 2 per cent of pre-tax profits to social development. Yet we go beyond this, and seek to create social impact through all the businesses we operate. While the Indian government now requires Indian companies to contribute towards social development, I challenge the Indian private sector to go further. Take up the challenge and strive to balance economic prosperity and social wealth which helps ultimately to create more gainful jobs and all inclusive nation.

In framing the new development agenda, the private sector must focus on tackling unemployment and job creation on a massive scale, and on dramatically improving access to electricity. These goals are critical to both lives and quality of life, and cannot be accomplished without collaboration with the private sector.

Development framework

For example, much of the mandated and voluntary private sector investments could go into creating many of the 100 million new jobs India will need over the next decade.

Lack of access to electricity is also a major challenge that will prevent us from eradicating poverty. Millions of mothers are giving birth in the dark, life-saving vaccine deliveries are challenged by lack of power to support their cold chains, and 90 million children go to school without electricity.

If we agree that access to electricity and improved livelihoods are vital components for the success of the post-2015 development agenda, then the private sector must have a key role to play in its design and implementation.

For governments, achieving the goals of the post-2015 development framework will mean enacting reforms and creating new policies to build more competitive business environments. We in the private sector must act with integrity, making sure that markets drive development, not oppose it.

We must focus on creating and multiplying value in the societies in which we source, supply and operate, and integrate this into our corporate governance, our operations, our project development and our profit calculation, across the value chain.

To truly combat poverty, we must combine the best qualities of all sectors: the political will, resources, and convening power of governments; the compassion, selflessness and dedication of non-profits; the innovation, expertise, and financial capital of the private sector; and the drive, creativity and entrepreneurial spirit of the people we seek to help. Only then can we hope to take on the challenges of the post-2015 development agenda.

(The writer is chairman of the Heirs Holdings group, Lagos)