Social Security in India - 5 Key Aspects & Recent Developments YouTube Lecture Handouts
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Social Security in India - 5 Key Aspects & Recent Developments
Social Security in India
Recent Developments
Recent Developments
Article 22- Universal Declaration of Human Right
Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality.
- Welfare
- Food & Shelter
- Vulnerable Sections of Society
- Elderly, Unemployed & Sick
US Versus World
- USA – Social Insurance for retired & disabled
- World – Economic security for people facing risks
ILO – Social Security
- Old Age pension (Social Insurance)
- Survivor՚s benefit (Social Insurance)
- Family benefit
- Medical care (Basic Security)
- Maternity benefit
- Unemployment benefit (Social Insurance)
- Sick Leave Benefit (Services)
- Disability Benefit (Social Insurance)
- Employment Injuries (Services)
Income Maintenance
- Social insurance: PMSBY, PMJJBY
- Means-tested benefits: Financial assistance to those who are unable to cover basic needs, like food, clothing and housing, due to poverty or lack of income
- Non-contributory benefits: Special schemes, administered with no requirement for contributions for people in certain categories of need, veterans of armed forces, people with disabilities and very old people.
- Discretionary benefits: Based on the discretion of an official, such as a social worker.
- Universal or categorical benefits or demogrants: Non-contributory benefits given for whole population like family allowances or public pension in New Zealand
The Need
- 2014,94% workforce in informal sector – 370 million
- 1⟋8th of world՚s elderly population in India
- Lack of employment opportunity
- Top 1% grew its share - from 37% in 2000 to 53% in 2016 – Rising Income Inequality
- 3 Mega Schemes – Accident Coverage, Life Insurance and Pension
- Agricultural sector = 160 million
- Contract, services, construction = 90 million
- Trade, Commerce, transport, storage & Communications = 115 million
- Others = 47 million
- Total = 412 million people
Social Security in India
- Concurrent List – Social Security & Labour Welfare
- Article 41 & 42 of DPSP
- Item No. 23
- Social Security and insurance
- Employment and unemployment
- Item No. 24: Welfare of Labor
- Conditions of work
- Provident funds
- Employers′ liability
- Workmen՚s compensation
- Invalidity and old age pension
- Maternity benefits
- B. P. Adarkar developed first Social Security scheme in India in 1944
- Started in 1952 for 2.5 million factory workers
- Compensation ⇾ Restoration ⇾ Prevention
- Employees′ Provident Fund Organization (EPFO) : Pension Scheme & Insurance Scheme – Members & Family benefits for old age, disability, and support in case the primary breadwinner dies
- Citizens of Belgium, Czech Republic, Denmark, France, Germany, Hungary, Luxembourg, the Netherlands, Norway, the Republic of Korea, and Switzerland Can contribute to EPF in home country for 5 years
- Employees′ State Insurance Corporation (ESIC) : Low-earning employees - basic healthcare and social security schemes, mainly factory workers & also employees in hospitals or educational institutions.
EPFO
- Ministry of Labour and Employment.
- 3 party board called the Central Board of Trustees.
- 3 different schemes:
- The Employees′ Provident Funds Scheme, 1952 (EPF) .
- The Employees′ Deposit Linked Insurance Scheme, 1976 (EDLI) .
- The Employees′ Pension Scheme, 1995 (EPS)
Comparison | Provident Fund | Pension Fund |
Meaning | Employer and employee make a contribution while in employment with the organization | Created by the employer in which he contributes an amount of his salary for providing retirement benefits to the employee |
Who makes the contribution | Both employer and employee – obligatory if income < ₹ 15,000 & voluntary thereafter. Employer (1.67 - 3.67%) & employee (10 - 12%) | Employer and Central Government - Employer (8.33%) , Government (1.16%) but not the employee |
Statute | Employee՚s Provident Fund Scheme | Employee՚s Pension Fund Scheme |
Amount received | Lump Sum | Either Lump Sum or in the form of regular income depends on pension opted by the member |
Basis of the amount | The contribution made by both the parties, plus interest thereon | The pension amount will be based on an average of last 12 month՚s salary and years of service |
Withdrawal | Entire amount. Partial withdrawal allowed for House Construction, Marriage, Higher Education, Illness etc. | Only 1⟋3rd amount can be withdrawn |
Organized Sector
- Employees′ State Insurance Act, 1948 (ESI Act) : Covers factories and establishments with 10 or more employees – medical care, cash benefits in sickness & maternity, monthly pension after death/disability
- Employees′ Provident Funds Act, 1952: Factories and establishments employing 20 or more employees - provident fund, superannuation pension, and family pension in case of death during service.
- Workmen′s Compensation Act, 1923 (WC Act) : Compensation to the workman or his family in cases of employment related injuries resulting in death or disability.
- Maternity Benefit Act, 1961 (M. B. Act) : 12 weeks wages during maternity & paid leave in certain other related contingencies.
- Payment of Gratuity Act, 1972 (P. G. Act) : 15 days wages for each year of service to employees who have worked for five years or more in establishments having a minimum of 10 workers.
NPS – National Pension Scheme
- Pension Fund Regulatory and Development Authority (PFRDA) on 10th October, 2003
- Retirement income to all citizens – Since 2009
- Initially for new govt. recruits (except armed forces)
- Swavalamban Scheme: Encourage people from the unorganized sector to voluntarily save for retirement
- Permanent Retirement Account Number (PRAN) – Unique & same
- Tier I Account: Non-withdraw able account (resident/NRI) – Deduction under 80 C
- Tier II Account: Voluntary savings facility: Free to withdraw with no tax benefits
PPF
- By National Savings Institute of the Ministry of Finance in 1968
- Rate from 1 Apr 2016 is 8.1% per annum
- Interest is non-taxable
- Mobilize small savings
- Deduction under 80 C
- Maximum ₹ 1.5 lakh per year
Pradhan Mantri Suraksha Bima Yojna (PMSBY)
- Risk coverage in case of accidental death, full or partial disability
- Insured amount for accidental death and full disability is ₹ 2 lakh
- ₹ 1 lakh for partial disability
- Annual premium of ₹ 12 - auto-debited by the bank
- Age – 18 to 70 years
- Aadhar linked bank account – opt in every year by 1st June
- Ministries can co-contribute premium for beneficiary from Public Welfare Fund (created in 2015 - 16) out of unclaimed money
Pradhan Mantri Jeevan Jyoti Bima Yojna (PMJJBY)
- Benefit in case of death
- Age – 18 to 50 years
- If joined before 50 years – can benefit till 55 years
- Annual premium – ₹ 330 – Auto-debited from bank
- Sum assured ₹ 2 Lakh
Atal Pension Yojana (APY)
- Uninsured workers in unorganized sector under NPS
- Contribution on a monthly, quarterly, half yearly basis
- Account will not be deactivated unless balance gets zero
- Voluntary exit is now allowed
- Age – 18 to 40 years
- Minimum pension after 60 years of age
- Half yearly contribution of ₹ 248 at 18 years or ₹ 685 at 30 years – pension of ₹ 1000 per month
Jan Dhan Yojana
- Universal banking coverage across all 6 lakh villages in India
- One basic bank account per household – Rupay debit card, pension and insurance
- Bring excluded section in financial mainstream
- Efficient transfer of subsidies
- Economic equality
- Remove financial untouchability
- Aim – Jan Dhan to Jan Suraksha
Universal Basic Income: A Conversation with & Within the Mahatma
- Chapter in Economic Survey 2016 - 17
- Amount – ₹ 3,000 to 12,000 per year
- ₹ 1,500/month to nearly 200 million poor = ₹ 3 lakh crore
- Automation is killing jobs
- 40% to 65% of targeted populations never received benefits of food subsidy and employment guarantee, MGNREGA – Misallocation, Leakage, and Corruption
- Selective initially – Roll out for vulnerable groups - pregnant women, widows, senior citizens, physically or mentally challenged
- Only 1 in 5 have Jan Dhan Account & of that only 60% Aadhar linked
- It will disincentivize work
- Temptation expenditure might increase – Alcohol & tobacco
- Club all subsidies & give poor 1 basic income cheque
- Prerequisite - Jan Dhan, Aadhaar, Mobile (JAM) scheme: Provide all Indians with a bank account and the ability to receive funds electronically by mobile phone
Developments on Way
- Separate Provident fund legislation exists for workers employed in Coal Mines, Seamen and for Tea Plantation workers in Assam
- ₹ 1,000 allowance to unemployed educated youth demanded
- 10 paisa/ticket – Cess to cover 20,000 railway coolies under EPFO
- 10 - 12 lakh rail travel tickets per day – of which 58% reserved tickets.
- Can mop up ₹ 1.2 lakh per day for this purpose
- Economic Survey 16 - 17: Choice of ESI or Private health insurance. EPFO vs. NPS
✍ Manishika