GS 3: Inclusive Development

Introduction:

• The Periodic Labour Force Survey Annual Report 2021­-22 highlights that around 53% of India’s salaried workforce lacks social security benefits, including provident funds, pensions, health care, and disability insurance.

• Moreover, just 1.9% of the poorest 20% quintile has access to any benefits, and gig workers, constituting 1.3% of the labor force, struggle to access social security.

• India’s social security system ranks poorly on an international scale, ranking 40 out of 43 countries according to Mercer CFS in 2021.

Lack of Policy Attention and Implementation:

• India’s policymakers have historically allocated limited budgets and demonstrated poor utilization of resources for social security schemes.
• For instance, the National Social Security Fund, established in FY11 for unorganized sector workers, received a meager ₹1,000 crore initial allocation, far below the estimated requirement of over ₹22,841 crore.
• A Comptroller and Auditor General of India (CAG) audit revealed that ₹1,927 crore accumulated in the fund since its inception remained unutilized.
• Consequently, various social security schemes were rendered ineffective.

Current State of Social Security:

• The National Social Assistance Programme, designed to provide old-age pensions, suffers from inadequate contributions, stagnating at ₹200 a month since 2006, well below the minimum daily wage.
• Similarly, funds collected for social security provisions for construction workers were underutilized, with only 6% of the money being used.
• Inefficiencies were also identified in the direct benefit scheme for deceased beneficiaries in Haryana.
• Budgetary cuts to the Mahatma Gandhi National Rural Employment Guarantee Act further compound the issue.

International Comparisons:

• Contrasting with India’s situation, Brazil’s General Social Security Scheme offers comprehensive coverage, including income loss due to accidents, disability, illness, family burdens, and unemployment.
• Brazil’s Constitution mandates national treasury intervention if funds are insufficient. Social security benefits are easily accessible without extensive documentation.

Challenges of India’s Informal Sector:

• Approximately 91% of India’s workforce operates in the informal sector, lacking access to social security.
• With the aging of the population, a lack of social protection for these workers becomes a looming concern.
• While the Code on Social Security (2020) aimed to enhance social security for various worker categories, its focus on formal enterprises left out the informal sector.

Proposed Reforms:

India needs to establish comprehensive social security coverage for its entire workforce, grounded in fiscal and administrative feasibility. The suggested reforms include:

1. Expanding contributions to the Employees’ Provident Fund Organisation (EPFO) for formal workers.
2. Implementing partial contributions for informal workers with substantial income and encouraging informal enterprises to formalize and contribute.
3. Providing government support for unemployed or low-earning individuals.

The estimated cost of providing social protection for the poorest 20% of the workforce would be ₹1.37 trillion, approximately 0.69% of GDP in FY20.

Reforms in Progress:

Efforts have been made with the introduction of the Code on Social Security and the e-Shram platform, enrolling millions of workers and expanding insurance coverage.

However, the burden of registration primarily falls on informal workers, neglecting employers’ responsibility in the process.

Recommendations for Further Reforms:

• Implement a pan-India labor force card.
• Expand successful schemes like the Building and Other Construction Workers Schemes.
• Provide better support for domestic workers and migrants.
• Strengthen existing schemes like the Employees’ Provident Fund (EPF) and the Employees’ State Insurance Scheme (ESI).
• Raise awareness about social security benefits and rights among workers.

Conclusion:

For equitable growth and improved job security, India must revamp its social security framework.

Consolidating existing schemes and implementing universal social security for the entire labor force is crucial.

As job dynamics change and insecurity grows, effective policies are needed to ensure growth’s benefits are widely shared while providing a safety net for workers.

Question: Analyze the reasons behind the failure of policy implementation in India’s social security system. How does limited budgetary allocation and underutilization of funds impact the effectiveness of social security schemes? (15 marks)