social security system is woefully inadequate, compared even to
those of several third world economies with no higher per capita
incomes. Some states in India have fairly comprehensive social security
schemes, notably Kerala, and also West Bengal and even Tamil Nadu,
but the scale of benefits they provide is modest. The Union government
however, despite its enormous fiscal powers, has been quite lackadaisical
in providing social security. Even the Unorganized Sector Workers'
Social Security Act enacted by it, 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 niggardliness is particularly evident in the case of old age
pension schemes. Some state governments no doubt have responded
to the need to provide old-age pensions, but they have been inevitably
hamstrung by their meagre resources. The Union government no doubt
has the Indira Gandhi Old Age National Pension Scheme, but it covers
only the BPL population and persons above 65 years of age; and the
pension amount it provides is an abysmal Rs.200 per month. Even
so, the desperate need of the people for succor can be gauged from
the fact that an estimated 1.65 crore persons access this scheme
despite the meagre help it provides.
Even if we add together all the existing pension schemes, they collectively
touch, at best, only the fringe of the problem. First, they are
an assortment of specific schemes rather than an expression of a
right to pension. Secondly, they do not provide universal coverage.
Leaving aside the pension schemes of the organized sector, the others,
such as they are, target specific groups of unorganized sector workers;
and even when they are not tied to specific occupational categories,
such as the IGOANPS, they nonetheless cover only the BPL population,
whose size, as is well-known, is arbitrarily fixed by the Planning
Commission at a ludicrously low level. Thirdly, a large number of
them insist on some contribution from the beneficiaries. And fourthly,
the amount of pension they provide, as we have already seen, is
This is a serious problem, and one that is likely to become even
more serious in the years to come because the increase in longevity
and the fall in the birth rate would raise the percentage of the
''old'' in the population. It is estimated that by 2050, nearly
a fifth of the world's population will be above 60, and in India
and China the proportion is likely to be around 24 percent. All
over the world progressive forces are demanding the institutionalization
of a publicly-funded, universal, non-means-related, non-contributory
pension scheme for the aged, to be accessed by them as a matter
of right. This demand has also begun to be raised in India, as the
dharna at Jantar Mantar between May 7 and May 11 has just demonstrated.
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 are persons
who had earlier been 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 have not paid 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 which underlies the argument both
for the welfare state and for socialism, namely that material deprivation
is the result not of some individual failing on the part of the
deprived but of the social arrangement within which they live. If
there are people in society who are hungry and malnourished, then
it is not their fault but that of the social arrangement under which
they live; if there are people who are involuntarily unemployed
then the reason for that lies in the social arrangement under which
they live; if there is concentration of wealth at one pole and of
poverty and destitution at another, then this is reflective not
of some ''natural order of things'' but of the specific social arrangement
under which people live. And this social philosophical position
is not a matter of faith, but is analytically sustainable.
To overcome destitution, including that which afflicts the old,
we have to change the social arrangement which produces it, and
the first step in that direction is the use of the fiscal powers
of the State. (The socialist argument is that such use, which also
amounts to interfering with the distribution of resources, is not
enough, and that the underlying property relations themselves have
to be altered). And 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, upon whom falls the responsibility
of adjusting the social arrangements for this purpose.
Now, the State has alternative means of raising its revenue. 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.
The demand for a non-contributory scheme therefore is derivable
from the rights-based approach, as indeed is the demand for universality.
Of course if a person is already a beneficiary of an existing pension
scheme, providing an additional pension to that person as part of
a universal publicly-funded scheme appears unnecessary; but many
would argue that a system of progressive direct taxation would automatically
take care of this double benefit; hence such double benefit should
not come in the way of universality.
But this last point belongs to the realm of minutiae. The basic
argument for a universal, non-means related, non-contributory pension
scheme, as a right ensured to the old, stands unimpaired. 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''.
But, what, it may be asked, constitutes adequate means of livelihood?
Here one can follow two different approaches. The first, which is
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 2100 calories per person per day in urban
areas and 2400 calories (later reduced to 2200 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 2200
calories)and Rs.65 in urban areas, whose weighted average (if we
are to avoid different amounts of pension payments), works out to
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.1800.
The other approach, the one adopted by the ''Pension Parishad''
which had organized the dharna at Jantar Mantar, sees the pensioners
as ''workers'' and hence entitled to a proportion of the wage income
as pension. On this basis 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.2000 at the current price, whichever
is higher, as the pension amount per month. 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 on either approach
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 take the age to be a blanket 60 for the third world
countries. The ''Parishad'' estimates about 10 crore persons as
belonging to these age groups. If some exclusions are made, e.g.
for those who pay income taxes, or those belonging to the organized
sector whose pensions already exceed the stipulated amount, or if
the age is increased to say 60, there would still be around 8 crore
persons to provide for. At the rate of Rs.2000 per person per month,
the total amount would come to Rs.192000 crores which is, in round
figures, 2 percent of the GDP.
Questions will be immediately raised on how resources of this order
of magnitude can be found. But the magnitude of the requisite resources
can be put into perspective as follows: the growth rate of the economy,
as the Union government never tires of repeating, has been around
8 percent , or, in per capita terms just over 6 percent. The resources
required will be only one third of the increase in per capita income,
i.e. if only a third of the increase in one year in the per capita
income of the country is collected from the ''average'' Indian then
the resources so obtained will be quite adequate to finance a universal
pension scheme .The average Indian of course does not see his or
her income rising at 6 percent 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 for financing
the pension scheme. This surely is affordable, especially when the
Union government has given away Rs.500,000 crores per annum, i.e.
more than double the amount needed for the pension scheme, in the
form of corporate tax reliefs in recent budgets.
For raising these resources however fresh taxes will have to be
levied. The National Commission on Enterprises in the Unorganized
Sector had suggested a set of cesses to finance a far more modest
social security scheme, costing only 0.5 percent of the GDP. In
international discussions the emphasis has been on a combination
of Tobin Tax (at 1 percent) and profit tax (2 percent 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 proposls
can be worked out for India as well. The crucial need is to put
democratic pressure on the State for launching such a scheme.
This article was originally published in the Hindu, 10 May 2012,
and is available at