(The Gist of Kurukshetra) Social Security: Issues, Challenges and Initiatives

(The Gist of Kurukshetra) Social Security: Issues, Challenges and Initiatives
[July-2020]

Social Security: Issues, Challenges and Initiatives

Introduction:

The balanced and overall development of any country 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 citizens becomes highly significant, especially in a developing country like India. The Prime Minister’s recent introduction of new social security schemes to ensure Financial Inclusion, insurance and pension for all is, undoubtedly, a laudable step. These schemes are expected to enhance the welfare of the downtrodden, particularly the workers in the unorganised sector.
Before discussing these schemes at length, let us understand the concept itself. 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 its productivity. It indirectly also influences domestic demand and facilitates growth of an economy.
As per International Labour Organization (ILO-2014 records) only 27 percent of the global population enjoys social security in any form whereas 73 percent is deprived of it. The need for such highly subsidized programmes arises in India because nearly 90 percent of workers in India earn their livelihood in the unorganised sector, which lacks social security. The population in the unorganised sector thus remains most vulnerable to various unforeseen shocks which hinder poverty alleviation and inclusive growth. In fact, the indirect cost of absence of social security might well be increasing social costs resulting from monitoring and managing of ill health accompanied by various related social and labour problems, including absenteeism. On the contrary, a work force with higher capability and social security could contribute to higher growth, which in turn would enhance aggregate demand in an economy through higher purchasing power of the vast mass of the work force in the unorganised sector.
In 2014, the government launched Pradhan Mantri Jan Dhan Yojana (PMJDY), a national mission on Financial Inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country in two phases. The key features of the scheme are a zero-balance bank account, Rs. 5,000/- overdraft facility for all Aadhar-linked accounts, RuPay Debit Card, pre-loaded with Rs. one lakh accidental insurance cover. Ministry of Finance (MoF) and National Informatics Centre (NIC) have also jointly developed a mobile app called Jan Dhan Darshak with a view to enable common people in locating a financial service touch-point.

Pradhan Mantri Jeevan Jyoti Bima Yojana:

It was launched on May 09, 2015, is another important milestone in this direction. It is a government backed Life Insurance Scheme, available to people in the age group of 18 to 50 years having a bank account who give their consent to join/enable auto-debit. Aadhar would be the primary KYC for the bank account. The Risk Coverage under this scheme is for Rs. two Lakh in case of death of the insured, due to any reason.
The premium is Rs.330 per annum which is to be auto-debited in one installment from the subscriber’s bank account as per the option given by him/her on or before May 31 of each annual coverage period under the scheme. It is a pure term insurance policy, which covers only mortality with no investment component. Risk cover under PMJJBY is applicable only after the first 45 days of enrolment. In other words, insurers do not have to settle claims during the first 45 days from the date of enrolment.
However, deaths due to accident will be exempt from the lien clause and will still be paid. The scheme is administered through LIC and other Indian private life insurance players. As for the process of enrolment, banks have tied up with insurance companies. One may also approach their banker.

Prime Minister Suraksha Bima Yojana:

Prime Minister Suraksha Bima Yojana was announced with an objective to help the vulnerable sections stay prepared in cases of unforeseen emergencies, especially when they are faced with unexpected death and impairments.
The essence of the scheme is to provide people with a Personal Accident insurance cover at a price that is considerably lower than what is charged under commercial insurance plans.

Features of PMSBY:

A low-priced policy can be purchased for Rs. 12. Option to choose a long-term policy or yearly renewability.
Easy exit and re-entry measures. It can help save tax.
Money is given to the nominee in case of death. Auto-debit of premium from the bank account.

Benefits:

Accident insurance cover without spending a lot as compared to other policies.
The welfare of the family in case of death, as the claim amount can be availed by the nominee.
No regular payment formality worries due to auto-debit facility.
Easy processing of continuous cover. Flexibility to continue or discontinue as per one’s wish.
Deduction as per Section 80C and Sum Insured of Rs. 1 lakh is non-taxable as per Section 10(10D) of IT Act.

Sukanya Smridhi Yojana:

Sukanya Smridhi Yojana (SSY), a small-scale savings scheme for the daughter’s education and marriage, initiated as a part of government’s Beti Bachao, Beti Padhao mission.
The government wants to convey a message that if a parent could make a proper plan for their girl child, they can definitely improve and secure their daughter’s future. It is suitable for a daughter up to 10 years of age with annual contribution ranging from a minimum of Rs.1000 to a maximum of Rs, 150000 and provides an annualised return of 8.1 percent.
Ministry of Finance, further, through its notification dated 12 December, 2019, has brought about the following changes in the above flagship scheme:
Higher interest rate for default accounts which means that even on non-deposit of minimum Rs. 250 SSY A/c will keep on earning the interest rate applicable to the scheme.
Changes in rules for premature closure of account: The old rules of the scheme allowed closure of the account in two cases - due to death of girl child and in case of change in residency status of girl child whereas now premature closure is allowed even on compassionate grounds including situations such as medical treatment of the account holder for life threatening diseases or death of her guardian.
Change in A/c opening age: The newly notified rules, allow that the account cannot be operated by the girl child till she attains the age of 18 years as against 10 years as per old rules.
Opening of accounts for more than two girl children: According to the newly notified rules, if accounts are to be opened in case of more than two girl children, then along with the birth certificates, an individual is required to submit an affidavit instead of Medical Certificate.

Conclusion:

Well-defined social security programmes need to be welfare-oriented, inclusive, wider-based and better implemented. Making schemes targeted and contributory could negatively affect these features. Considering that government is already spending nearly 3 percent of GDP on pensions, it is thus argued that a universal pension and gratuity schemes are possible within a limited expenditure, without placing any significantly large additional stress on the fiscal. In order to meaningfully implement the proposed universal schemes, collaborative exercise with post offices in addition to banks can be considered.
Thus, people having accounts in post offices can also be offered these schemes. Further, even if people have bank accounts in cooperative banks, they can also be offered the schemes to ensure wider coverage. Another dimension of universal pension scheme can be that preference for a male child as a support in old age could come down though this area needs further research to empirically establish a causal relationship. This could improve the sex ratio in the country, something that the governments have been trying since the last few decades.
It goes without doubt that adequate social security enhances economic growth and thus reduces the burden of tax financed schemes through generation of additional revenue. Unlike present set of social security schemes, a non-contributory universal scheme is probably the need of the country that has remained ignored till date.
It would be advantageous to have universal schemes at least for the next few decades, until India achieves a better per capita income and has achieved total eradication of poverty.