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Saturday, July 28, 2007

Social security in the socialist republic of India

The unorganized sector in India employs over 400 million workers which is 93% of the total workforce. People thus employed include agricultural laborers, shop-assistants, construction workers, maids, casual workers and illegally employed child laborers. The NSSO survey highlighted this sector as the key source of employment growth (organized sector was stagnant over last decade).

While the preamble of the constitution of India resolves to constitute India into a socialist republic, the country has failed to provide any substantial social security for this majority of our workforce as it celebrates 60 years of Independence. With a part of the population believing in the fatalistic writings of ancient religious texts, part believing that Indian traditions will automatically ensure that the young will take care of the old, and the rest hazed by the mask of a supposed meritocratic system in the country (to each his own), there has been little political resolve in tackling this issue. Piecemeal efforts such as the ‘Janshree Bima Yojana’, insurance for the poor, and Krishi Shramik Samajik Suraksha Yojana, insurance for landless agri-laborers, have been far from effective in its reach and scope.

Workers in the unemployed sector themselves have limited foresight to build up their old savings. For most of them, life is little more than the drudgery of a hands-to-mouth existence, and with there being a high probability of a shortened lifespan (due to appalling public health infrastructure catering to the poor), it’s hardly surprising that they consider saving for old age a silly luxury. With several of them earning below the government stipulated minimum wage of $1.6 per day (particularly women and illegally employed child laborers), even an extremely cautionary approach on their part would leave little of worth to sustain them at old age. If someone survives beyond a point when he/ she loses capacity for physical labor, he/ she usually ends up as a beggar.

So what’s the solution? Governments and NGOs can of course play a significant role by educating the unorganized sector workers on the importance of savings. Robin Blackburn has proposed a global pension scheme funded by initiatives similar to Tobin taxes on global financial transactions (such a scheme would significantly benefit India as a recipient). In recent years, central and state governments have also been more pro-active in this regard. The National Old Age Pension Scheme (NOAPS) now covers 8 million people providing monthly pension of $5 per month (increased in 2006 from $2 p/m.)

The ruling alliance at the center plans to introduce a bill soon to provide for welfare schemes for the unorganized sector. While the proposed bill will cover areas such as life, health and disability insurance, old-age pensions and maternity benefits; prominent trade unions have attacked the proposed bill citing lack of firm financial commitments and digression from earlier proposed roadmaps. Projected to cost over $10bn a year to be of any use, it remains to be seen how this ambitious takes off in the coming months. Subsequently, the country needs to enhance the scope of NOAPS to better cater to women whose household work (not valued economically in most societies) is not captured under the unorganized sector bill.

The Indian media, as expected, has been hardly bothered with this significant development, and have decided to rather focus on India-England cricket, Sanjay Dutt trials, and a gay lover's threats to Sonu Nigam. Without popular awareness of such schemes, what can ensure that this too doesn’t end up as several other public initiatives: opaque to the point of irrelevance?

P.S. Please read Rajiv Ahuja's paper on "Old age income security for the poor " and Robin Blackburn's paper on "Global pension"

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