While India still ranks poorly on global social security (SS) indices, recent years have seen significant incremental advances on this front. At the foundational level, the country’s SS net mainly consists of a free ration scheme, the largest of its kind in the world and which entails substantial budgetary expenditure, a poorly implemented minimum wages law, and the Employee Provident Fund (EPF) Scheme that covers just 70 million of the country’s 550 million workforce. Government-sector employees had the benefit of guaranteed pension for long, sans any defined contribution. Though this was replaced with a funded scheme two decades ago, a new scheme launched recently reintroduced the guarantee element, with joint, defined funding by all stakeholders including the government. Furthermore, the yet-to-be-notified Code on Social Security (CSS) 2020 comprises a statutory framework for the benefit of urban and rural poor, as well as construction, gig, and informal-sector workers. Besides various insurance covers, the CSS seeks to extend maternity benefits to the informal sector, while women workers in the organised sector enjoy these already. The support prices for crops, and subsidisation of farm inputs like fertilisers, electricity, and seeds, also help the low-income population, though these are trade-distorting.
Other relatively recent SS initiatives include the e-Shram digital platform and Pradhan Mantri Shram Yogi Maandhan, both for unorganised-sector workers, and the Atal Pension Yojana. A decent Rs 5 lakh-a-year health insurance cover to senior citizens above 70 years irrespective of income status has lately been launched under the Ayushman Bharat Yojana, and reports suggest the government is set to raise the wage ceilings for mandatory inclusion of workers under both EPF and the Employees’ State Insurance Corporation schemes to bring millions of more people under the fold. Yet, social security remains fragile and narrow in the country. The relevant schemes are very fragmented and are governed by multiple laws and agencies. These are also hugely underfunded.
Over 90% of the country’s workforce are in the informal sector, and deprived of any meaningful SS support. Just 1 million out of 63 million Indian enterprises and 7.5% of the labour force make contributions for SS, and over half of the salaried workforce are destitute of any such benefits. In fact, SS is not just a conceptual formulation in India, but something guaranteed under Article 43 of the Constitution, which talks about “living wages”, and “decent working conditions”. As a country whose median income is the lowest among emerging market economies, and still occupies an unenviable slot on the global hunger index, SS has greater scope, relevance, and utility in India.
The setting up of the proposed omnibus Social Security Fund must be expedited. There ought to defined sources for building this corpus, and it should be separate from the consolidated fund of India, with the sole purpose being financing of SS. Defined contributions from the beneficiaries themselves must be a key element of resource mobilisation, which could be in the form of a levy on wage for those who can afford it. For others, the benefits could be defined, taking into account the actual needs, and the resource status. What is required to correct India’s “unduly low” wages and bridge its yawning inequality divide, is however, a policy mix that would simultaneously spur economic growth, job creation, and labour productivity. The inbuilt biases against wage increases must be shunned, and the balance of trade must be calibrated to benefit all stakeholders.