Social Security Schemes (Pension and Insurance ): Unorganized Sector

New social security schemes to ensure insurance and pension for all is an integral aspect of social security strategy. These schemes were launched on May 9, 2015 and are expected to enhance the welfare of the citizens, especially for the workers in the unorganized sector. The schemes are

• Pradhan Mantri Suraksha Bima Yojna (PMSBY), an ultra-low-cost accident insurance scheme;
• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), a life insurance scheme; and
• Atal Pension Yojana (APY), a contributory pension scheme with defined benefit outgo.

Since, these schemes are considered to be welfare oriented, they remain significant for a developing country like India because development requires not only attaining high GDP but also improvement in the quality of life of citizens. Therefore, to promote improvement in the quality of life, ensuring provision of adequate social security to citizen becomes important.

Social security might be defined as a provision of protection for individuals, and households, to ensure their health and income, especially in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a sole earning member.

Thus, social security can help in reduction of poverty and inequality and therefore support inclusive growth through enhancing human capital and productivity. It indirectly also influences domestic demand and facilitates growth of an economy.

The need for such highly subsidised programs arises in India because nearly ninety percent of workers in India earn their livelihood in the unorganized sector, which lacks social security schemes. The population in the unorganised sector thus remains most vulnerable to various unforeseen shocks which hinder poverty alleviation and inclusive growth.

Social security schemes are mainly of two types.

The first being unfunded and the second being funded.

An unfunded scheme is one in which there is no creation of fund specified for the purpose of social security. The benefits are paid directly from the taxes and financed from government budgets. In contrast a funded schemes based on contributors’ payments. The amount of fund collected is invested in markets and returns on the fund aroused to pay to the contributor on his exit from the scheme. The conditions of exit from the scheme are decided prior to joining the scheme. The social security benefits are received by respective contributors of the scheme, exclusively.

Since independence, social protection policies in India largely covered workers in organized sector. The workers belonging to the unorganized sector have largely remained outside the social security net and had to depend largely on their families for an informal arrangement of social security. But with increasing nuclearisation of families, a need for social security in India for workers in the unorganised sectors has emerged. Social security measures, especially accident and health insurance, can help in increasing longevity of life.

The social security problems of workers in the unorganized sector may be divided into two categories.

The first being deficiency or lack of capability to save because of inadequate employment, low earnings, low health and educational status, amongst other factors, as these workers belong to poor sections of society.

The second arises out of adversity in the sense of an absence of adequate safety net to meet emergencies such as ill-health, accident, death and old age.

Historically, number of initiatives have been taken by the central government to extend social security to workers. However, such social security entitlements initially have remained mainly for workers in organized sector, and, in some cases, if available for the unorganised sector have been discretionary based on occupation.

To directly address issues related to workers in unorganized sector, certain social security initiatives were introduced in 1995 under the National Social Assistance Programme (NSAP).

• It mainly involved transfer of cash from the government to the individual and was launched with the objective of providing some financial security to poor and destitute persons in event of old age, death of breadwinner, and maternity.
• The scheme is 100 percent funded by the central government to ensure that a minimum level of social protections available for poor and old persons, throughout the country.
• This protective social security programme is provided to very poor citizens without any reference to their status as workers.

Apart from this, there are also other initiatives (from both central and state governments) that are targeted for poorer sections of society and select occupational groups, but are mostly contributory in nature. The major objectives of these measure where to reduce poverty and economic inequality, and to improve quality of life. These schemes are

• Baristha Pension Bima,
• National Family Benefit Scheme,
• Janashree Bima Yojana,
• Universal Health Insurance Scheme,
• Rastriya Swasthya Bima Yojana,
• Indira Gandhi National Old Age Pension Scheme (IGNOAPS),
• Annapurna Scheme,
• New Pension Scheme (NPS) and
• Swavlamban scheme (also known as NPS Lite).

State managed pension scheme for formal sector, managed by the Employees Provident Fund Organization (EPFO) was introduced in 1995.

In order to address workers in the informal sector; IGNOAPS was set up in the same year, targeting those who were below poverty line.

A major reform was introduced in 2009 when NPS was floated for all Indian citizens. Earlier, from January 1, 2004, a mandatory NPS had already been introduced for new recruits in central government civil services.