July 16, 2023

Crying Need for Universal Pension in India

M Ajith Kumar

India has low pension coverage and the pension system is unable to fulfill its purpose. A non-contributory basic pension can guarantee a regular income in old age to all residents of the country, regardless of earning or occupation. A state convention organised by the Kerala unit of the All India Insurance Pensioners Association (AIIPA) at EMS Town Hall, Ernakulam, demanded introduction of non-contributory basic pension that will guarantee a regular income in old age to all residents.

Prof. R Ramakumar of Tata Institute of Social Sciences, Mumbai, in his keynote address at the convention, argued that a properly crafted universal pension scheme would increase the coverage of pension without putting stress on the fiscal situation. He said that in a welfare state, old age social security remained pivotal and one of its major components was pension. He pointed out that post-independence pension schemes were consolidated and expanded to provide retirement benefits to the government and public sector working population. Further, he said, several provident funds were also set up to extend coverage among the private sector workers and the general public.

Explaining the global trends in implementation of universal pension, Prof. Ramakumar said countries like the Netherlands and Norway provide a universal basic pension that is tax-financed. Even countries like Mauritus, Namibia and Nepal have pension schemes based on citizenship, residence and age, he explained. Elaborating the theme, he highlighted that investment in social protection is yielding returns in many countries by stimulating economic growth and stability and improving the performance of national economies, resulting in more equitable and cohesive societies. Most countries successfully use social protection policies, schemes and benefits to combat poverty and inequality, he added.

Though India has had an elaborate pension system, a majority of workers in the country's informal sectors are not entitled to any pension. In spite of the specific constitutional mandate, Prof. Ramakumar said, the Indian government paid scant attention to the relief of its elderly citizens. He said the leading programme of the Union government to provide essential relief to older people in the informal sector was National Social Assistance Program (NSAP), which is administered by the Rural Development Ministry. Out of 13 crore elderly citizens who worked in the informal sector, the scheme reached just about 2.2 crore people, he said. The recent labour market trend suggested that further shrinkage in coverage, given the low growth in organised labour force while unorganised employment is on the rise. Narrating the Covid experience of the informal sector workers, he said more than one crore migrant workers had to return to their native places. A majority of them lost their jobs affecting basic necessities like food consumption, he added.

He said that because of the central government policies, Indian pension system is passing through a crisis of confidence. The economic, demographic and labour market trends of the prevailing system are moving in troublesome directions, he observed. Moreover, the demographic age structure of the population is changing drastically, with an increasing life expectancy of 70 years and a declining birth rate. The result of such demographic transition will be a larger proportion of older people.

In spite of the growing realization about the deficiencies of the pension system, he argued that the government showed hardly any interest in taking reformatory steps to overcome these problems. Prof. Ramakumar, supporting the resolutions passed at the convention, stressed the importance of extending social protection to all workers in the informal sector of the economy, particularly those who are most disadvantaged. In the post-Covid context, he stressed that non-contributory pensions need to be enhanced to Rs 4,000 by taxing the high-income group, prospering on the incentives and tax concessions, since the commencement of liberalization policies. The cost is fiscally feasible, since covering the poorest will require only one per cent of the GDP per year, he said. He lauded the policies of a few state governments offering universal social protections paying up to Rs 1,500 as pension.

Amanulla Khan, former president of AIIEA and the editor of Insurance Worker, in his inaugural address, explained that universal pension was an important component of social protection aimed at preventing, reducing and eliminating economic and social vulnerabilities, poverty and deprivation. He said that despite rapid growth over more than seven decades an estimated 80 per cent of the population in India remains without access to adequate social protection cover. He observed that in our country a large number of people continue to suffer from various deprivations and have low human capabilities.

He said social protection which helped in the realisation of human rights is enshrined in the Directive Principles of the Indian Constitution. India's vast informal and heterogeneous characteristics of workforce, with growing informalisation of employment, has resulted in low levels of social protection and high vulnerability and is a big obstacle to the expansion of social protection. Due to the lack of government oversight, a large proportion of these workers work in exploitative and precarious conditions.

Amanulla Khan deplored the vengeful attitude of the central government towards the pensioners and employees of public sector life and general insurance companies. He wondered why in spite of having the internal resources to modify and improve the pension and family pension, the central government is dragging its feet. Changes in the family pension are already implemented in the banking sector, he added. He said that memorandums were forwarded to the prime minister, finance minister and Members of Parliament, who were sympathetic to our cause. He elaborated that pensioners of almost all financial sector institutions were granted the benefit and there was no logic in singling out and discriminating against insurance pensioners. Referring to the Life Insurance Corporation of India, he said the pensioners were hoping that the contributions they made during their service period to create a world class financial institution that is the backbone of the Indian economy remained unrealized. And added that conditions of family pensioners remained precarious and a good number of them were not even getting pension equivalent to the minimum wage of an unskilled labourer in this country. He said the Covid pandemic revealed the extent of vulnerability of India's poor, especially the informal workers.

AIIPA president M Kunhikrishnan, who presided over the convention, demanded early notification of 30 per cent family pension in LIC and general insurance sector. Elaborating on the resolutions passed at the convention, he said a non-contributory universal pension of Rs 3,000 should be sanctioned to all those who are not part of any social protection coverage. He further added that the board of directors of LIC and governing board of GIPSA had already submitted the recommendations for improvement in the family pension to a uniform rate of 30 per cent to the Government of India for notification. But the government was now delaying the notification without any justification. He said the RBI and the public sector banks had already implemented the enhanced family pension. He said the Association resolved to intensify the agitation further if there is a delay on the part of the government.

S S Anil, O C Joy, R Preethy, K Pradeep, K K C Pilla and T C Jagadish spoke on the occasion explaining the pension issues in other sectors. Sony Komath welcomed the gathering and K K Sajeevan proposed the vote of thanks.