India's social security system is woefully inadequate, when compared
even to those in third world economies with no higher per capita
incomes. Some States in India have fairly comprehensive social security
schemes — notably Kerala, also West Bengal and Tamil Nadu — but the
scale of the benefits is modest. However, the Union government has been
quite lackadaisical in providing social security despite its enormous
fiscal powers. Even the Unorganised Sector Workers' Social Security Act,
which came into force in 2009, is merely an enabling legislation; it
does not seek to put on the statute books any specific comprehensive
scheme of social security.
This stinginess is particularly evident in old-age pension schemes. Some
State governments have responded to the need to provide old-age
pensions, but are hamstrung by their meagre resources. The Union
government's Indira Gandhi Old Age National Pension Scheme (IGOANPS)
covers only the Below Poverty Line (BPL) population and persons above 65
years of age; the pension amount it provides is an abysmal Rs.200 per
month. Even so, an estimated 1.65 crore people access this scheme, an
indication of the desperate need for succour.
Four negatives in schemes
Even if we add up all the existing pension schemes, they touch only the
fringe of the problem. First, they are an assortment of specific schemes
rather than an expression of a right to pension. Second, they do not
provide universal coverage. Leaving aside the pension schemes of the
organised sector, the others, as they are, target specific groups of
unorganised sector workers; even when not tied to specific occupational
categories, such as the IGOANPS, they cover only the BPL population,
whose size is arbitrarily fixed by the Planning Commission at a
ludicrously low level. Third, a large number of them insist on some
contribution from the beneficiaries. And fourth, the amount of pension
they provide, as we have already seen, is pathetically small.
So pervasive, however, is the impact of the bourgeois media in India
that even many otherwise well meaning persons may not appreciate the
rationale of this demand. Why, they may ask, should a pension scheme be
publicly-funded when those who draw the pension were earlier employed by
private employers? Why should it be universal instead of being
means-related? And why should it be non-contributory? Why should people
who did not pay towards a pension scheme nonetheless enjoy a right to
draw a pension?
The starting point of the answer to such questions is the basic social
philosophical position that underlies the argument both for the welfare
state and for socialism, namely, material deprivation is the result not
of individual failing on the part of the deprived but of the social
arrangement within which they live. This position is not a matter of
faith; it is analytically sustainable.
To overcome destitution, including that which afflicts the old, we have
to change the social arrangement which produces it. The first step in
this direction is the use of the State's fiscal powers. Since the
essence of democracy is that everyone must have adequate means of
sustenance, access to it must be a right which is guaranteed by the
State, on whom falls the responsibility of adjusting the social
arrangements for this purpose.
Contribution by beneficiaries towards a State-maintained pension scheme
is just one way that the State can raise resources for such a scheme.
But to make that a condition for pension payment, apart from being
iniquitous, undermines the right to pension that must be a part of
democracy. Therefore, the demand for a non-contributory scheme is
derivable from the rights-based approach, as indeed is the demand for
universality. Of course the “old” are not the only deprived section in
our population; poverty, deprivation and hunger are rampant in our
country, but that is an argument for extending the right to adequate
means of livelihood to all, not for denying it to the “old.”
Adequate means
But what, it may be asked, constitutes adequate means of livelihood?
Here one can follow two different approaches. The first, used in much
international discussion, is to define “adequate” in the sense of
avoidance of poverty, which in India is defined officially as access to
2,100 calories per person per day in urban areas and 2,400 calories
(later reduced to 2,200 calories) per person per day in rural areas. The
daily per capita expenditure level at which this was achieved in
2009-10 was Rs.36 in rural (for 2,200 calories) and Rs.65 in urban
areas, whose weighted average (if we are to avoid different amounts of
pension payments), is Rs.46. At current prices this would be equivalent
to around Rs.60; in which case the monthly pension amount on this
criterion should come to Rs.1,800.
The other approach, the one adopted by the Pension Parishad, which organised the Jantar Mantar dharna,
sees pensioners as “workers” and hence entitled to a proportion of the
wage income as pension. Based on this, the Parishad has demanded half
the monthly minimum wage rate, or (in view of the differing minimum wage
rates across States) a flat amount of Rs.2,000 at the current price,
whichever is higher. This approach has merit. But no matter what precise
figure is adopted (and the two are pretty close to one another), the
point to note is that both approaches conclude that the monthly pension
payment should be far higher than the current measly sum of Rs.200.
The Pension Parishad puts the pensionable age at 55 for men, 50 for
women and 45 for specially deprived communities, while international
discussions fix it at a blanket 60 for third world countries. The
Parishad estimates that about 10 crore people belong to these age
groups. With some exclusions, e.g. those who pay income tax, or those
belonging to the organised sector whose pensions already exceed the
stipulated amount, or if the age is increased to say 60, that would
still be around eight crore people to provide for. At the rate of
Rs.2,000 per person per month, the total would come to Rs.192,000 crore
which, in round figures, is two per cent of the GDP.
Questions will be immediately raised on how such resources can be found.
But the required resources can be put in perspective as follows: the
growth rate of the economy, as the Union government never tires of
repeating, has been around eight per cent, or, in per capita terms just
over six per cent. The resources required will be only one third of the
increase in per capita income, i.e. a third of one year's increase in
the per capita income collected from the “average” Indian will be
adequate to finance a universal pension scheme. The average Indian of
course does not see his or her income rising at six per cent per annum
in real terms, but this should make it even easier to garner the
required resources from the well-to-do who corner the increases in
income. In subsequent years, since the “real” pension per head will
remain unchanged and the total amount will increase only at a rate
slightly higher than the rate of population growth (owing to the
increase in longevity), the percentage of GDP required for the scheme
will keep going down, i.e. lesser and lesser proportions of the
additions to annual income will have to be taken from the “average”
Indian to finance the pension scheme. This surely is affordable,
especially when the Centre has given away Rs.500,000 crore per annum,
i.e. more than double the amount needed for a pension scheme, in the
form of corporate and other tax reliefs in recent budgets.
For raising these resources, however, fresh taxes will have to be
levied. The National Commission for Enterprises in the Unorganised
Sector (NCEUS) had suggested a set of cesses to finance a far more
modest social security scheme, costing only 0.5 per cent of the GDP. In
international discussions the emphasis has been on a combination of
Tobin Tax (at one per cent) and profit tax (two per cent of profits) for
financing such a global scheme (which is supposed to cost $250 billion,
at $1 a day for all those above 65 years in advanced countries and
above 60 years in third world countries). Similar tax proposals can be
worked out for India as well. The crucial need is to put democratic
pressure on the State for launching such a scheme.
(Prabhat Patnaik is Fellow at the Centre for Economic
Studies & Planning, JNU)
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