A case for universal pension

At a rally organised by the Pension Parishad in New Delhi on March 6.

INDIA prides itself on being a “young” society, likely to benefit from a demographic dividend as children and young people move into working age groups over the next decade. This optimistic view assumes that society will be able to increase both education and employment generation sufficiently so as to create a reasonably well-educated workforce of working age which will be able to find productive and paying jobs. If not, of course, the dividend could easily turn into a disaster.

But another crucial fact that this argument forgets is that as life expectancies increase, India also has—and increasingly will have—a significantly growing number and share of elderly people. It is estimated that in another decade, there will be nearly 20 million people above the age of 80 years, nearly 70 million above the age of 70 years and around 165 million of 60 years and above—or more than 12 per cent of the population.

Like so much else in the economy and in society, we have barely thought about this issue or even begun to plan for it. There is much that has to be done, in terms of providing the necessary infrastructure to enable the elderly to be mobile and as self-sufficient as possible; ensuring that social services are going to be sufficient in quantity, nature and quality to meet the varied and growing requirements of the ageing population; and generally providing conditions for the elderly to live a life of dignity.

Forget about the future, we certainly do not deliver any of these things even at present, even though already people aged 60 years or more currently account for around 8 per cent of the population. The report by the Central Statistics Office (Situation Analysis of the Elderly, 2011) on the conditions faced by most elderly people in the country makes for pathetic reading. Around two-thirds of the elderly have to depend upon others for their day-to-day maintenance. While the majority of elderly men were economically independent, less than 20 per cent of women were so. Nearly 40 per cent of persons aged 60 years and above (60 per cent of men and 19 per cent of women) were working, with the ratios in rural areas about double those in urban areas. Quite often this was because of the need to survive, and the work they engaged in was likely to involve difficult physical labour, because many of these elderly people were found to be illiterate or with very low levels of schooling. Disabilities were also prevalent to a much greater extent among the elderly population than the other age groups. In the group of 80 years and more, 28 per cent of men and 36 per cent of women were not physically mobile, which obviously dramatically increases their dependence.

Public policy in India has tended to assume that traditional familial ties will ensure that the elderly will be taken care of by their near kin, and therefore, it has tended to be less than forthcoming in the social provision of some income security for those who are no longer able to work because of age or disability. But, it is clear that such systems (which were never as strong as generally perceived in any case) are breaking down, and especially among poorer households the difficulties of maintaining older members of the household have generated instances of neglect or even cruelty.

Internationally, it is now widely recognised that the care of the elderly is the common responsibility of society. In countries where most economic activity is in informal work and a lot of labour is also unpaid and unrecognised, the case for universal social pension that does not rely on contributions by the person or the employer is a very strong one. That is why over one hundred countries—including many at relatively low levels of per capita income such as Nepal, Guatemala and Kenya—have instituted pension schemes that are non-contributory and universal (with some exclusion criteria) in nature.

In India, the need for such a pension scheme was officially mooted by the National Commission for Enterprises in the Unorganised Sector (NCEUS), although unfortunately the United Progressive Alliance (UPA) government did not take its own report seriously enough. Since then, the Central government has been playing an on-again-off-again game with the demands of the Pension Parishad for a universal pension scheme that would provide half of the minimum wage to all elderly people (barring those with pensions from other sources and those above a relatively high level of income). The usual arguments are raised against the idea: that it will cost far too much for the government; that it will be inflationary; and so on.

But some State governments have been more receptive and recognised both the validity and necessity of such pensions. The State government of Kerala, for example, has a pension scheme for unorganised workers, which covers around 60 lakh beneficiaries (more than two-thirds of such workers). This was set up in the 1960s and 1970s as a result of demands from below, as the land reforms also contributed to the mobilisation of unorganised workers. The Left Democratic Front government, which was in power until 2011, increased the monthly pension from Rs.110 to Rs.400, although that is also by now far too little and needs to be increased.

However, only three States—Rajasthan, Goa and Haryana—have tried to put in place a universal pension scheme. Of these, Goa (the richest of these States) gives the highest amount of Rs.2,000 a month to its elderly people, Haryana provides Rs.1,500 and Rajasthan Rs.500. The Central government contributes only Rs.200, with the State governments bearing the rest.

The Rajasthan government’s scheme for universal pension (which seeks to simplify eligibility and is relatively recent) includes the elderly, widows, divorced women, transgenders, persons with disabilities, those falling below the poverty line and dwarfs less than three-and-a-half-feet tall. The eligibility limit for the old, widows and divorced women is fixed at an income below Rs.48,000 annually, and the age limit is 55 years for women and 58 years for men. Around five million people in Rajasthan are now beneficiaries of such pensions. When combined with the scheme for distribution of free medicines through the Rajasthan Medical Services Corporation, this has the potential to reduce some of the severe distress faced by the elderly, as well as ease some of the financial constraints of the households in which they reside. Of course, there are bound to be issues with implementation, but the very bringing of such a scheme may create the momentum among people to ensure that there is public mobilisation to have it properly implemented.

The point is that some State governments are already showing what is possible, but there are obviously limits to how much can be done by State governments given the structure of fiscal relations and the financial constraints increasingly faced by the States. The case for the Central government taking this issue seriously and instituting a universal pension with an increased amount that renders it at least close to half the minimum wage is, therefore, both compelling and urgent.