India
must be one of the worst countries in the world in terms
of not providing minimal even social security for most
of its people. This is not just a major failure of the
development project in the country - it is also a significant
cause of it, even though this is rarely recognised.
There is good reason to argue that when public investment
and social spending are lacking, this reduces the capacity
of households and individuals to ensure healthy and
educated lives as well as their ability to spend on
a range of other goods and services.
So the problem of low per capita income is effectively
perpetuated by low purchasing power of the people, which
in turn does not create incentives for appropriate private
investments. In other words, it is not only that low
levels of GDP reduce the perceived possibility for providing
citizens with their basic social and economic rights,
but also that the state's neglect of such rights - and
the associated failure to provide enough public resources
for them - reduces the possibilities for sustainable
and equitable economic growth based on the domestic
market.
There are many areas in which this absence of basic
security is evident: in the rampant and growing food
insecurity in the country; in the poor quality of essential
health and sanitation services that can be accessed
by most people; in the inadequate essential infrastructure
(such as electricity and piped water supply) that is
still not available to a shockingly large proportion
of households, and so on. But it is also sharp in terms
of the absence of social protection to cover the most
basic contingencies of life.
This is particularly marked in the case of old age,
and the neglect of the income security of the elderly,
who form a growing part of the population. Much is often
made of India's ''young'' population, but we have been
remarkably resistant to recognising and addressing the
problems of the growing numbers of senior citizens.
We do not design our infrastructure or amenities taking
into account their concerns; we invest little to address
the health and other issues they face. Most of all,
we leave it entirely to families to handle their consumption
requirements in old age, even though that traditional
safety net was never well developed for certain segments
(such as widows) and has become increasingly fractured
by the pressures of the aggressively commercialising
economy.
Over 7-11 May in the nation's capital, an important
dharna was held at Jantar Mantar, to make the demand
for a universal pension scheme applicable to all citizens
of India. The Pension Parishad, which was created earlier
this year in Pune, has grown to reflect the coming together
of several organisations and individuals. The dharna
mobilised thousands of people from 18 states, including
not just senior citizens from all walks of life, but
also those who are not yet senior citizens but still
recognise the importance of such provision for a decent
society.
The basic demands of this group are eminently reasonable:
a universal pension to be provided to all citizens (excluding
those who receive pensions from other sources) at half
the minimum wage - currently amounting to about Rs 2000
per month - to be paid out of the state exchequer, for
citizens above defined ages (55 years for men, 50 years
for women, and 45 years for those from deprived communities).
In addition, those who are unable to work for reasons
beyond their control, such as those with disabilities,
would also receive a similar pension.
Typically, when such demands are raised, two responses
are immediately encountered. First, that the country
- and the government budget - simply cannot afford such
a large outlay of resources. Second, that such an expenditure
will be inflationary and cause prices to rise such that
the benefits to the people will be lost.
Consider the argument that the country as a whole is
still too poor to provide for all of its elderly. This
is simply not validated by international experience.
Many developing countries have implemented such universal
pension schemes, including those much poorer than India,
with lower per capita incomes and less potential resources
with the state. In Namibia, Botswana and Mauritius,
such schemes have been around for quite a while now,
while they have been implemented in the last decade
in Bolivia and Lesotho. South Africa and Kenya have
expanded earlier schemes and are trying to make them
universal. China introduced a rural pension scheme in
2009.
One of the most interesting examples comes from India's
neighbour Nepal, which started its universal pension
scheme in 1995. At that time, the qualifying age was
set at 75 years and the pension benefit was 10 per cent
of per capita GDP. Thereafter, in the middle of the
last decade, the government of Nepal reduced the age
of eligibility from 75 to 70 years and to 60 in one
part of the country. It also increased the size of the
benefit to 25 per cent of GDP per capita, and announced
that pensions would be paid to all widows over the age
of 60.
The two critical features of such schemes are that they
are universal (applicable to everyone above a defined
age) and non-contributory (not dependent upon payments
made during the course of a working life). These are
essential elements of a truly effective social protection
floor that is increasingly being promoted by some international
organizations like the ILO. The point is that universal
non-means-tested pensions automatically protect an entire
population, in a way that contributory, earnings-related
pensions never can.
This
is particularly true in countries like India where there
is a high degree of informality and a significant proportion
of the work force is employed in the low-remuneration
subsistence activities in agriculture or non-agriculture.
It is also important as a means of implicitly recognizing
the economic contribution of the unpaid labour of women,
many of whom are never recognized as workers even though
they contribute to family and social reproduction in
a variety of ways.
In terms of budgetary resources, obviously the amount
will vary depending upon the age of eligibility and
the amount given. With 60 years and Rs 2000 per month,
the estimated amount is in the region of around Rs 150,000
crore. This seems like a huge amount, but is still less
than one-third of the huge amount given away annually
as tax giveaways to large corporations and others, according
to the Finance Ministry's own calculations. And it is
less than 2 per cent of GDP, which is less than other
(poorer) countries with universal pension schemes are
currently spending. Obviously, therefore, bringing in
such a scheme requires a re-arrangement of the tax system,
with a change in tax policies to ensure greater tax
revenues.
Here the critics will cry that such a tax-and-spend
strategy will discourage growth. But that need not happen
at all - indeed, such a strategy is more likely to put
growth on a firmer footing because it will generate
more effective demand through the multiplier effects
of the pension incomes being spent. Since most of this
money will go to people who will spend locally on goods
and services, this will help to generate more productive
employment in small-scale activities and create a bottom-up
growth process.
The second major criticism of such a form of public
spending is that it will be inflationary. This could
well occur if there are supply-side bottlenecks that
prevent the multiplier process from working through
to create a virtuous expansionary cycle. So the point
is to prevent that through minimising such bottlenecks.
This is why schemes of social protection must be part
of a broader growth and development strategy that seeks
precisely to deal with such supply side constraints.
In other words, the focus for sustained growth should
be on public investment in physical and social infrastructure
that ensure the supply of necessary goods and services,
while measures of social protection also ensure that
demand keeps increasing from the population in a stable
and inclusive way.
This is a strategy of economic expansion that is fundamentally
different from the elite consumption, credit-driven
bubble that has been created by the process of external
financial integration. But it is likely to be more economically
stable and politically sustainable and above all more
humane and civilised. That is why the Pension Parishad's
demand should be taken seriously, not just by those
who will be directly affected, but by everyone searching
for different and more progressive and desirable ways
of organising our economies.
*
This article was originally published in the Frontline
Volume 29, Issue-10 May 19-June 01, 2012.
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