This study analyses the challenges in the design and implementation of social security schemes and uses this understanding to draw lessons for designing a comprehensive social security scheme for India.
Approximately 85% of India’s labour force works in the ‘unorganized sector’, defined broadly as those who do not have contracted employment with a formal sector employer, and therefore do not enjoy the social welfare benefits usually accorded to formal sector employees. In recognition of this fact, as well as the recognition that long-term demographic trends indicate a rapidly ageing population and a non-declining unorganized sector workforce, The Government of India passed the Unorganized Worker’s Social Security Act (UWSSA) in 2008. The purpose was to provide India’s large unorganized sector workforce with a minimum level of social protection that would enable them to endure income and health-related shocks, stay out of poverty, and ultimately allow them to lead dignified lives. Over the past decade, there has been a proliferation of publicly provided schemes in the insurance and pension sectors, both at the national and state levels. While they represent an important step forward in India’s ability to provide adequate, reliable, and affordable social protection options for its vulnerable population (especially in light of decades of failed attempts at direct provision through the public distribution system), there are still considerable weaknesses in the design and delivery models of these schemes.
The passage of the UWSSA has tied in with the introduction of several publicly provided, national and state-level social security schemes in the insurance and pension sectors. This report covers the entire gamut of issues from ownership structure, program coverage, and delivery architecture to the specific design elements of individual social security products, namely life insurance, health insurance, and pensions. This study, therefore, has two clear purposes: (i) Providing a detailed account of the currently implemented government-sponsored social security schemes for the unorganized sector, including product features such as eligibility criteria, the scope of coverage, and pricing, as well as their major implementation and design-related strengths and weaknesses, (ii) Providing a clear set of recommendations and guidelines on how to design and implement a comprehensive social security scheme for the unorganized sector, which includes life insurance, health insurance, and pension.
The biggest challenge in the present institutional design of social security schemes is the fragmented ownership structure of these schemes. NPS-Lite is under the Pension Fund Regulatory and Development Authority (PFRDA), AABY is under the Ministry of Finance, and RSBY is under the Ministry of Labour and Employment. Additionally, since social security is a subject in the Concurrent List of the Constitution, there are several instances of overlap between social security schemes provided by the Centre and the state governments. As a result of this fragmented ownership structure, data on social security schemes are captured separately today. For example, analysis of RSBY data is contracted out to GIZ, life insurance data is housed at LIC, and pension data is housed by the Central Record Keeping Agency and owned by PFRDA. Moreover, schemes like AABY and RSBY rely on beneficiary lists like the BPL list (merged with other employment lists such as NREGA workers or railway porters‘ list to identify beneficiaries.
While these schemes represent an important step forward in India‘s ability to provide adequate, reliable, and affordable social protection options for its vulnerable population, they still suffer from considerable weaknesses and, as a consequence, citizens in the unorganised sector continue to be exposed to the risks of mortality, health events and longevity, which significantly impact their long-term well-being. Analysis and recommendations presented in this report are a meaningful addition to the debate on the design and implementation of social security for India.