The concept of social security is not new in India. Traditionally, a moral economy existed to provide security to the older destitute and other vulnerable groups in society. This worked within joint family systems in which the younger generation was taught to care and look after the older generation.

A sense of respect and duty of caring was associated with being a member of the family. This system has provided income, health care, and personal, physical, and emotional security for all family members, including the elderly.

However, gradually, due to a host of factors such as work-related migration, withering of traditional familial structures among others – traditional support systems are disappearing, and state-based social security systems have come into existence.

In 2005, India reached the threshold according to which the UN defines a country as “aging”, i.e. at least seven percent of the population is 60 and older. As part of a bigger landscape, in 2010, Asia accounted for 54.4% of the global total of those above 60 years of age, and this is projected to increase to 59.9% by 2030.

A combination of low fertility rates and a longer life expectancy will result in populations that are older and increasingly reliant on governmental social safety nets than at any previous time. Thus an aging population needs to be looked at as part of a complex economic and fiscal problem having a bearing on the economic output of the nation, and the world as a whole.

Any analysis of pension schemes should have a focus on the effects of the pension system on growth, labor markets, and equity, and should consider the pension system as a whole and not each component separately.

The main objectives of any social security (or social protection) system are consumption smoothing over an individual’s lifetime; insurance (particularly against longevity and inflation risks); income redistribution for society as a whole; and poverty relief. There has been a tendency of looking at pension policies in isolation and enforced without much evidence. There is a strong case for viewing social security systems as an integral part of the overall economic, social, human resources, and political management in India.

This will require a change in the mindset – from welfare orientation to professional-technocratic service orientation. The need for effective management and application of the principles of pension economics and finance in social security policymaking and administration must receive much greater recognition than is the case currently.

There is also a sound argument of integrating healthcare and social security for elder persons as a unified policy response. Many studies have shown that a better standard of living has a positive correlation with the quality of healthcare received by elder persons. Thus it is also useful to regard healthcare and pensions as a bundle of goods and services that the elderly will need to consume.

This bundle of services represents a significant share of national income (up to 20% in OECD countries). How this bundle of services is financed and organized could not only impact the adequacy of current healthcare and pension arrangements but on other important areas as well. Better management of healthcare expenditure through “healthy aging”, also increases the real value of pension income.

What this essentially means is that having better healthcare policies in place, that in turn not only result in longevity of life but also increase the quality of such life and may also increase the purchasing power of such elder persons during the retirement period. From a macroeconomic perspective, more effective use of primary care and secondary care through “gate-keepers” also reduces healthcare expenditure.

As these are complex intertwined fiscal policies, a high economic growth is imperative to increase the state capacity to be able to spend such amounts of money. Therefore economic growth can also be argued to be a moral imperative.

The Indian Perspective

The majority (about 80%) of India’s elders still reside in rural areas; 40% live below the poverty
line, with nearly 33% just above it. The most vulnerable are those who do not own productive
assets, have little or no savings or income from investments made earlier, have no pension or
retirement benefits, and are not taken care of by their children; or they live in families that have low and uncertain incomes and a large number of dependents.

Nearly half of the elderly are fully dependent on others, while another 20% are partially so. Particularly in rural areas the tendency is to spend more on their growing children, while minimizing expenditures on aged parents; thus, financial security for the elderly in rural families is very limited.

It is also useful to regard healthcare and pensions as a bundle of goods and services that the elderly will need to consume.

Retirement for older Indians, however, has not been and is not the norm today. Those working in the “organized sector” (primarily government employees), who constitute 10% of the working population, are subject to mandatory retirement.

Almost 90% of workers are found in the agricultural sector where there is no retirement age. Rural elderly continue to work but they reduce the number of hours worked, especially with increasing age. Workers in this sector are subject to numerous disadvantages. Wages are relatively low and there is no job security. Most do not have year-round work and labour turnover is high.

Article 41 of the Indian constitution directs the Indian state to deliver “public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want”. This has been the impetus behind many of the state sponsored national pension assistance programs.

The state’s pension policy for government employees hasn’t been the focus of much scholarship and debate due to the fact that such persons are not in dire need of such state assistance. There has been a much greater focus on analyzing how the social security programs for the marginalized and down trodden work. There are two questions to be asked here. Firstly do the benefits of such schemes really reach the intended beneficiary, and secondly, what is the marginal improvement that such policies have on older persons.

Pradhan Mantri Shram Yogi Maan-dhan Yojna is the state social security policy for workers in the unorganized sector. It is aimed at persons mostly engaged as rickshaw pullers, street vendors, mid-day meal workers, head loaders, brick kiln workers, cobblers, rag pickers, domestic workers etc. It is a contributory and voluntary pension scheme for individuals from 18-40 (entry age) who earn less than 15,000 per month. Such persons receive 3000 per month after the age of 60.

However the much more important social security scheme can be argued to be the Indira Gandhi National Old Age Pension Scheme (IGNOAPS). This scheme does not involve any contribution and is a pure unconditional state assistance for those who fulfil the eligibility. The person should be over 60 years and should be living under the poverty line.

Article 41 of the Indian Constitution directs the Indian State to deliver “public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want”.

Even though there have been extensive debates about the way that the poverty line is calculated, many studies have shown that the scheme is highly successful and pensions reach the intended beneficiaries without major leakages or evidence of massive fraud.

The state also runs the Annapurna program which gives people 10kgs of ration per month for sustenance. However it is eligible only for people who are eligible under IGNOAPS but for some reason were not able to avail of the scheme. There is an additional qualification of ‘destitution’ under the program which varies from state to state and there exists no standard.

Public evaluation of entitlement programs

An extensive study conducted by IIT Delhi found some very important outcomes. More importantly it was able to uncover the real life impact of the social security schemes. A common objection to social security pensions is that they might displace or undermine family support for widows and the elderly. The survey suggests that, if anything, it is the other way round: a pension often helps them to earn some respect.

The study found that most beneficiaries of the IGNOAPS are economically inactive and live in households where familial support is limited: almost half live alone, or just with a spouse, or with unmarried children.

Most of them (82%) are illiterate, and about half were unable to engage in any productive work other than helping out with household chores. This makes them dependent on others for things as basic as food, clothing and shelter.

A common objection to social security pensions is that they may displace or undermine family support to the widows and the elderly.

Even where family support was available, it was inevitably meagre. Only 13% of the respondents’ families live in a pucca house, 18% have access to piped water, and 13% have a latrine at home. The study recorded the experiences of many beneficiaries of this scheme. Narrating the account of some such beneficiary, it notes:

“Among many beneficiaries was Vifai. Vifai is an 80-year-old dalit widow from Getara village of Surguja district, Chhattisgarh. She receives a monthly pension of Rs 300 under the Indira Gandhi National Old Age Pension Scheme (IGNOAPS). She lives alone as her sons have abandoned her. She is very frail, and unable to work. To collect her pension, she has to walk all the way to the bank, 12 km from her house. As she describes it, “Rengat rangat jaati hun, ab kya karun” (I crawl to the bank, what to do?).”

“JasoMahto is a 56-year-old illiterate widow who lives in Tulasikani village, Sundargarh district, Odisha. She gets Rs 300 a month under the IGNOAPS. She believes that her relatives would treat her worse than they do were she not getting a pension”.

“Tija Bai, a 65-year-old dalit widow from Rajpura village in Sirohi district (Rajasthan), said that her daughter-in-law ill-treats her. She is made to work a lot before she is fed. Tija Bai believes that the situation would be much worse if she were not getting a pension: “Agar pension nahi milti to roti aisi di jati hai jaise kutton ko roti fenk dete hain” (If I were not getting a pension, they would have fed me like a dog).”

Other considerations

Thus the evidence singularly pointed to the fact that a pension gives the recipient some sense of independence and security. Some pensioners are able to contribute to the household budget, especially in states where the pension amount is significant and make their role dignified within the family.

However the cost of collecting pension in itself is a major burden. Many other studies have shown that many people who either live far from pension collection centres, or suffer from any infirmity have to hire some form of transportation to ferry them to and- fro which in turn reduces the final pension amount.

Aadhar has been ruled as not mandatory for pension policies by the Apex court. Even though there is considerable evidence that even Aadhar does not seal leakages, in absence of Aadhar there are four main sources of leakages in such schemes.

First, enrolled pensioners might not be receiving their pension in full, or even in part. Second, duplicate records in the administrative database may lead to somebody else cashing in. Third, “ghost” beneficiaries may exist—these are pensioners who have died or do not exist, allowing fraud recipients to receive pensions. Fourth, pensioners may have to pay bribes at the time of joining or during the year to receive pensions.

The roadblocks to better implementation have always existed that stop the social security policies from being a success. Various institutional and procedural complications such as the identification of appropriate lead departments, the development of district-wise distribution of targets, the creation of state and district-level committees, and opening separate program accounts are some of the administrative problems that have arisen since the inception of the program.

The evidence singularly pointed to the fact that a pension gives the recipient some sense of independence and security.

Procedural issues included identification of true beneficiaries; often a procedure lacking accuracy, and ways to disburse payments. It was intended that this Central Government assistance would not displace the states’ own efforts and expenditures for their old-age pensions and that states could expand their own social assistance programs independently.

However, most of the states are disbursing only the national assistance funds and have diverted their own resources to other programs.

Finally there have been many recommendations for balancing the fiscal burden of the state with respect to social security programs with its other obligations. They can be divided majorly in four parts.

First, fiscal: examining the interaction among increasing government expenditures, growth of Gross Domestic Product, and the increasing dependency ratio. Second, market responsiveness: facilitating labor markets to respond flexibly to changing demographics. Third, active aging: encouraging people to remain active and independent as they age. Four, responsibilities: examining the balance between collective and individual responsibilities, the respective roles of the public and the state.

Many other studies have shown that many people who live far from pension collection centers, or suffer from any infirmity have to hire some form of transportation to ferry them to-and-fro, which in turn reduces the final pension amount.