Income Support for Vulnerable Groups: India

Symposium on Income Security for Older Persons in South AsiaFebruary 27, 2017

Under the Aegis of UN-ESCAP

Mukesh Anand

National Institute of Public Finance and Policy

New Delhi, India

mukesh_anand@hotmail.com; mukesh.anand@nipfp.org.in

Plan of the Presentation

• Brief characterisation of India – income (average), population (old, young), workers, poor (slides 3-5)

• Social Security: Imperative, Objective, Management, Sustainability (slides 6-13)

• Social programmes (slides 14-17)

• Non-contributory (PAYG) pensions in the public sector (slides 18-19)

• Contributory provident fund and pensions – applicability, coverage, beneficiaries, benefits (slides 20-23)

• Summary (slides 24-27)

• Suggestions for way forward (slide 28)

India: Income, PopulationNational Income, Exchange Rate 2011-2 2014-5

GDP at Current Prices, billion INR (trn USD) 87360 (1.82) 124882 (2.04)

Population (million) 1220 1267

Per Capita GDP in INR (USD) 71606 (1494) 98565 (1612)

Nominal Exchange rate, Average INR per USD 47.923 61.143

Population Characteristics, 2011 Census

Proportion (%) of All ages51.47 M

48.53 F

Proportion (%) of > = 65+ years2.67 M

2.79 F

Proportion (%) of > = 60+ years4.72 M

4.36 F

Proportion (%) < 14 years14.96 M

13.71 F

Proportion (%) < 19 years20.44 M

18.55 F

Proportion (%) of All Ages69 Rural

31 Urban

4.845.485.735.284.764.243.693.543.102.652.131.611.541.070.800.370.240.090.050.020.02

4.475.015.234.674.454.143.633.492.882.491.921.631.571.120.790.390.270.100.070.030.03

7.50 5.00 2.50 0.00 2.50 5.00 7.500-4

10-14

20-2430-34

40-44

50-5460-64

70-74

80-8490-94

100+

Percent

A

g

e

I

n

t

e

r

v

a

l

Population Pyramid, 2011

Male

Female

5.556.496.385.244.504.043.633.502.902.421.931.321.320.920.730.320.220.080.050.030.00

5.185.995.764.504.224.073.593.362.512.191.631.371.351.000.700.320.220.080.060.030.01

7.50 5.00 2.50 0.00 2.50 5.00 7.500-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

90-94

100+

Percent

A

g

e

I

n

t

e

r

v

a

l

Population Pyramid, 2001

Male

Female

6.246.856.195.044.474.123.573.292.722.262.021.301.420.770.660.250.250.070.050.020.01

5.966.425.574.394.414.143.402.962.352.051.691.261.290.760.600.240.230.060.050.020.01

7.50 5.00 2.50 0.00 2.50 5.00 7.500-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

90-94

100+

Percent

A

g

e

I

n

t

e

r

v

a

l

Population Pyramid, 1991

Male

Female

6.327.266.805.114.363.873.242.992.712.362.071.281.410.720.630.240.200.050.030.010.01

6.216.836.114.534.263.753.132.852.431.951.741.191.320.710.600.230.200.050.040.010.01

7.50 5.00 2.50 0.00 2.50 5.00 7.500-4

10-14

20-24

30-3440-44

50-54

60-6470-74

80-84

90-94100+

Percent

A

g

e

I

n

t

e

r

v

a

l

Population Pyramid, 1981

Male

Female

India (2011-2): Workers, Households, PovertyDescription Figures Region

Number of Labourers, Workers, Unemployed per 1000 persons NSSO 68th Round, July 2011-June 2012

406, 399, 17 Rural

367, 355, 34 Urban

395, 386, 22 Total

Propn. of Labourers (M,F); Workers (M,F) (per cent); e.g 55 (25) per cent of males (females) in rural areas were labourers

(55,25); (54,25) Rural

(56,16); (55,15) Urban

Out of Workers those that are Self Employed, Regular Wage / Salaried, Casual labour M;F denotes ‘Potential’ Coverage

(55,10,36); (59,6,35) Rural

(42,43,15); (43,43,14) Urban

Average Household Size (persons)

4.5 Rural

4.0 Urban

4.3 Total

Female Headed Households (per cent)12 Rural

12 Urban

Poverty Line, Monthly Per Capita Expenditure, INR 2011-2 (USD)

816 (17.03 USD) Rural

1000 (20.87 USD) Urban

Proportion (%) and Number (mn) of Poor

25.7 %, 216.5 mn Rural

13.7 %, 52.8 mn Urban

21.9 %, 269.3 Total

Social Imperative

• Higher incidence of poverty and destitution among old or aged – resulting from individuals’ myopia – are unable to foresee decline in earnings capability – and thus may not insure for old-age consumption requirements by saving from income when young

• Increased risk perception – vulnerability despite growth in incomes – inadequate savings (longevity risk); episodic expenses (health / morbidity risk); isolation, nuclear families (empty nest, physical security risk);

Core Objectives

• Poverty relief – anti-poverty measures

• Consumption smoothing – income replacement

• Insurance – supplementary benefits

Tier 2: Savings and Co-insurance: Personal Savings or Occupational Plans,Regulated, Mandatory, Funded, Taxed at lower or reduced rates

Tier 3: Personal insurance: Voluntary, Fully Funded, Savings, Taxed atnormal rates

3-tier or 3 Pillar approach

Tier 1: Redistributive: Mandatory, Minimum Pension, Flat, Payroll / Taxfinanced, Tax exempt

Tier 0: Basic income, Anti life-time poverty

Tier 4: Informal intrafamily, intergenerational financial and non-financialsupport

Managerial (Administration) Arrangement• Public (Social) programmes• National Social Assistance Programme (NSAP)• Swatantrata Sainik Samman Pension• Senior Citizen Savings Scheme (SCSS): 0.5 per cent higher interest on deposits by / for

the elderly

• Non-contributory programme• Government (Employer) sponsored programmes - Civilian employees [also covering

public sector corporations (including banks)] who joined before January 01, 2004, defenceemployees

• Co-contributory (Employer – Employee) programmes• Civilian employees (NPS) joining service on or after January 01, 2004• EPF&MP, CMPF&MP, J&KEPF, SPF, ATPPF&PFS, NPS-private, NPS-lite

(Swavlamban, Atal Pension Yojana)

• Personal savings and annuity plans• GPF, PPF, NPS-Private - savings-investment in long-term schemes managed by fund

managers (under PFRDA oversight)

Financing and Regulation

• Pension funds – long term debt market – consolidation of the capital market – improved corporate governance and corporate social responsibility

• Regulation of pension fund, its organisation, its investments, consumer grievances, regulator as a guarantor of fairness and justice

Sustainability ratios

• Passivity ratio (number of years in retirement : number of years in work)

• Replacement ratio (Pension : Wages)

• Dependency ratio (demographics) – population, system (number of retirees : number of workers)

783

730

687

597

1082

996

949

806

0 200 400 600 800 1000 1200

1981

1991

2001

2011

Ye

a

r

0-19 & 65+ 0-14 & 60+

8.6

8.5

7.9

7.3

12.8

12.3

10.7

10.1

0 2 4 6 8 10 12 14

1981

1991

2001

2011

Ye

a

r

19-64 14-59

← Age-dependency Ratio

Support Ratio →

Persons in age-groups 0 – 14 and 60+Persons in age-group 15 - 59

Persons in age-group 15 - 59Persons in age-group 60+

Economic Dependency Ratio

Census National Sample Survey Office

YearDependents Per

1000 WorkersYear

Dependents Per 1000 Workers

PS + SS PS

(1) (2) (3) (4) (5)

1961 1328 1977-8 1364 1695

1971 2037 1983-4 1381 1674

1981 1725 1987-8 1427 1740

1991 1667 1993-4 1381 1667

2001 1558 1999-00 1519 1740

2011 1513 2003-4 1375 1625

2009-10 1551 1740

2011-2 1591 1825

National Social Assistance Programme (NSAP), Dec’ 2015

Scheme

Below Poverty Line (BPL) Households:

Eligibility for BenefitsPeriodicity

Benefits

(INR)Beneficiaries

Beneficiary

AgeOther Conditions

(1) (2) (3) (4) (5) (6)

Indira Gandhi National Old Age

Pension Scheme (IGNOAPS)

a. >= 60 and

=< 79

b. >= 80

monthlya. 200

b. 50022.98 mn

Indira Gandhi National Widow

Pension Scheme (IGNWPS)

a. >= 40 and

=< 79

b. >= 80

monthlya. 300

b. 5006.33 mn

Indira Gandhi National

Disability Pension Scheme

(IGNDPS)

a. >= 18 and

=< 79

b. >= 80

Severe / multiple (80%)

disabilitymonthly

a. 300

b. 5001.09 mn

National Family Benefit Scheme

(NFBS)

18 =< Age at death of

primary bread winner =< 59

One-time

lump-sum20000 0.29 mn

Annapurna Scheme (AS) >= 65Those not covered under

OAPSmonthly

10 kgs.

of food-

grain

0.93 mn

Scheme-wise Beneficiaries from NSAP Schemes, mn

Scheme →IGNOAPS IGNWPS IGNDPS NFBS

Annapurna

SchemeYear ↓

2011-2 21.38 3.63 0.79 0.33 0.78

2012-3 22.71 4.96 1.09 0.39 0.82

2013-4 22.33 6.20 1.58 0.28 0.78

2014-5 22.98 6.33 1.09 0.29 0.93

Scheme StatusGender

TotalAge

Female Male < 80 >= 80

IGNOAPSSanctioned 12051474 12104663 24157466 20937953 3219419

New Appl. 32544 42468 75020 69400 5620

IGNWPSSanctioned 6941972 165 6942221 6801204 140953

New Appl. 25175 2 25181 25051 130

IGNDPSSanctioned 349614 643761 993581 983471 10110

New Appl. 954 2571 3529 3517 12

Sanctioned Pensioners and New Applicants

The Difference of Total, from the Sum of Female and Male, constitute the Transgenders

Details of Freedom Fighters Pension(Swatantrata Sainik Samman Pension Scheme)

Sl.

No.

Category of freedom fighters or their

kin

Total pension (per month)

before enhancement

Total pension (per month)

w.e.f. 15 August, 2016*

iEx-Andaman political

prisoners/spouses24 775 30 000

ii

Freedom fighters who suffered outside

British India (other than Indian

National Army (INA)) / spouses

23 085 28 000

iii Other freedom fighters (including INA) 21 395 26 000

iv

Dependent Parents (each) / Each

unmarried and unemployed daughter

(up to three)

3 380 (dependent parents)

5 070 (daughters)

50% of the sum that would

have been admissible to

freedom fighter i.e. in the

range of

13 000 to 15 000

Swatantrata Sainik Samman Pension (As on December 31)

Year(Apr–Mar)

Beneficiaries Nos.

Expenditure INR bn

Railway Passes INR mn

Home Repair INR mn

2004-5 169331 3.5 511.10 0.67

2005-6 169945 3.74 314.45 0.50

2006-7 169969 4.25 293.43 0.50

2007-8 170200 5.88 294.79 0.50

2008-9 170545 6.41 50.00 0.60

2009-10 170673 8.25 349.80 2.00

2010-1 171148 7.11 302.83 1.10

2011-2 171411 8.21 156.70 0.30

2012-3 171516 7.73 255.00 1.00

2013-4 171578 8.26 86.66 2.30

2014-5 171582 7.84

2015-6 171595 7.90

Year Pub. Sect.

Workers

(millions)

Population

(millions)

Col. 2 /

Col. 3 *

1000

(1) (2) (3) (4)

1961 7.05 439.23 16

1971 10.73 548.16 20

1981 10.91 683.33 16

1991 12.84 843.39 15

2001 12.95 1,028.74 13

2011 11.73 1,210.86 10

Government

Trend Growth

Rate

1987-8 to 2014-5

Retirement Benefits

/ Tot. Expenditure

1987-8 2014-5

Federal 16.50 2.08 5.01

All Provinces

Combined18.95 3.00 9.59

← Public Sector Workers

↓ Structure of Employees Cost to Establishment, (Federal Government)

← Expenditure on Retirement Benefits, %

60

65

70

75

80

85

90

95

100

195

0-1

195

5-6

196

0-1

196

5-6

197

0-1

197

5-6

198

0-1

198

5-6

199

0-1

199

5-6

200

0-1

200

5-6

201

0-1

Com

pen

sati

on S

tru

ctu

re (

per

cen

t)

Year

Pension Wages

States TGR Pensions (1987-8 to 2013-4, 2014-5) Pensions / Total Revenue (1987-8, 2014-5)

Andhra Pradesh 17.94 17.78 3.80 10.01

Bihar 20.17 20.02 3.36 13.47

Goa 21.01 20.81 2.47 8.58

Gujarat 17.48 17.39 3.43 9.99

Haryana 19.69 19.51 2.84 11.28

Karnataka 15.86 15.93 5.43 9.72

Kerala 16.94 16.83 11.54 19.42

Madhya Pradesh 18.22 18.18 2.73 7.97

Maharashtra 18.20 18.10 3.06 8.62

Orissa 21.18 20.94 2.76 11.26

Punjab 20.02 19.77 4.14 18.58

Rajasthan 19.21 19.10 3.01 10.54

Tamil Nadu 19.18 18.94 4.74 14.17

Uttar Pradesh 21.91 21.76 2.25 11.59

West Bengal 20.33 20.00 3.48 14.02

Arunachal Pradesh 22.32 22.26 0.60 5.26

Assam 20.87 20.76 1.85 13.72

Himachal Pradesh 20.52 20.24 3.84 16.33

Jammu and Kashmir 22.31 21.94 2.65 12.74

Manipur 20.60 20.46 1.66 11.68

Meghalaya 21.18 21.03 0.96 8.01

Mizoram 23.60 23.56 1.08 9.89

Nagaland 20.01 20.02 1.99 11.83

Sikkim 25.80 25.75 0.44 7.46

Tripura 19.89 19.53 1.77 9.06

Scope and Mandate of Provident / Pension Funds in India

Legislation / Act Applicability MembersCorpus

(INR bn)

(1) (2) (3) (4)

Employees Provident Fund and Miscellaneous Provisions (EPF&MP)Act, 1952

187 Industries (except in Jammu & Kashmir) employing 20 or more people

As on 31/03/2015

PF: 158.47 mn PF: 6209

PS: 117.81 mn PS: 2385

DLI: 157

The Coal Mines Provident Fund and Miscellaneous Provisions (CMPF&MP) Act, 1948

913 Units in private and public sectorAs on 31/12/2015

0.417 mn

The Seamen’s Provident Fund (SPF) Act, 1966

Seamen engaged in shipping industry (merchant navy)

As on 31/03/2016

67742 PF: 13.65

The Assam Tea Plantation Provident Fund and Pensions Fund Scheme (ATPPF&PFS) Act, 1955

All tea estates or tea gardens

As on 31/03/2015

900184

PF: 60.91

PS: 0.16

DLI: 1.16

The Jammu & Kashmir Employees Provident Fund (J&KEPF) Act, 1961

Workers in Jammu & Kashmir province in non-pensionable service

The Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013

(a) The National Pension System(b) Pension Schemes not Regulated

under any Other Acts

As on 31/03/2016

Total: 12.236 mn

CG: 1.658 mn

SG: 2.924 mn

Pvt. Sect.: 0.689 mn

NPS-Lite: 6.965 mn

Scope and Mandate of Provident / Pension Funds in India

Legislation / Act Applicability MembersCorpus

(INR bn)

(1) (2) (3) (4)

Employees Provident Fund and Miscellaneous Provisions (EPF&MP)Act, 1952

187 Industries (except in Jammu & Kashmir) employing 20 or more people

As on 31/03/2013

PF: 88.76 mn PF: 4367

PS: 80.8 mn PS: 1834

DLI: 121

The Coal Mines Provident Fund and Miscellaneous Provisions (CMPF&MP) Act, 1948

926 Units in private and public sectorAs on 31/12/2013

0.414 mn

The Seamen’s Provident Fund (SPF) Act, 1966

Seamen engaged in shipping industry (merchant navy)

As on 31/03/2013

52855 PF: 10.15

The Assam Tea Plantation Provident Fund and Pensions Fund Scheme (ATPPF&PFS) Act, 1955

All tea estates or tea gardens

As on 31/03/2012

808002

PF: 49.31

PS: .048

DLI: 0.89

The Jammu & Kashmir Employees Provident Fund (J&KEPF) Act, 1961

Workers in Jammu & Kashmir province in non-pensionable service

The Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013

(a) The National Pension System(b) Pension Schemes not Regulated

under any Other Acts

As on 31/03/2014

Total: 6506180 481.4

CG: 1357589 241.9

SG: 1991455 202.1

Pvt. Sect.: 341109 28.9

NPS-Lite: 2816027 8.4

Contribution, Pensioners, and Benefits

Scheme

Contribution (%)

PensionersAvg. Annual Ben. in INR

(USD)Total Pension Fund

(1) (2) (3) (4) (5)

EPF&MP, 1952

Employer: 13.618.33 (or max. of INR 15000 per annum)

Member, 3.57 mn

14130 (231)Employee: 12.00 Survivor, 1.53 mnCG: 1.16 1.16

CMPF&MP, 1948

Employer: 12

0.417 mnEmployee: 12

CG: 1.66 (or max. of INR 3200 per annum)

Seamens Provident Fund, 1966

Employer: 12

Employee: 12

ATPPF&PFS, 1955

Employer: 12 Member

Employee: 12 11604 47151 (771)

CG: 1.16Survivor

19867 4542 (74)

PFRDA, 2013

(a) CG, SG, Pvt. Sect.

Employer: 10

Employee: 10

(a) NPS-Lite

CG.: INR 1000 pa for 2009-10 to 2019-20

Worker: 12000 pa

Contribution, Pensioners, and Benefits

Scheme

Contribution (%)

PensionersAvg. Annual Ben. in INR

(USD)Total Pension Fund

(1) (2) (3) (4) (5)

EPF&MP, 1952

Employer: 13.618.33 (or max. of INR 6500 per annum)

Member, 2.97 mn

11728 (216)Employee: 12.00 Survivor, 1.43 mnCG: 1.16 1.16

CMPF&MP, 1948

Employer: 12

0.413 mnEmployee: 12

CG: 1.66 (or max. of INR 3200 per annum)

Seamens Provident Fund, 1966

Employer: 12

Employee: 12

ATPPF&PFS, 1955

Employer: 12 Member

Employee: 12 22870 28945 (604)

CG: 1.16Survivor

17983 4725 (99)

PFRDA, 2013

(a) CG, SG, Pvt. Sect.

Employer: 10

Employee: 10

(a) NPS-Lite

CG.: INR 1000 pa for 2009-10 to 2102-3

Worker: 12000 pa

Summary: Programmes for income support for elderly

• Non-contributory

• NSAP for elderly, widowed, and disabled; Freedom Fighters

• Public sector workers in service before January 01, 2004, defence workers (defined benefit that is wage and inflation indexed)

• Contributory

• Mandatorily applicable to workers in private sector and public sector (excluding defence workers, and joining service on or after January 01, 2004) – co-contributed by employee and employer

• Voluntary participation - with employee-employer co-contribution under EPF&MP and PFRDA – with only own contribution in PPF, NPS-Lite(Swavlamban), NPS-Private

Summary: Beneficiaries, Expenditure, Benefits, 2012-3

Pension Type Beneficiaries Public Expenditure Benefits

NSAP ~ 2.4 % of Popln< 0.70 % of Tot. Pub.

Exp (C + S)< Rural Poverty Line

(816) per month

SSSPS ~ 0.01 % of Popln0.05 % of Federal

Govt. ExpINR 48148 per annum

Non-contributory ~ 1.25 % of Popln7.2 % of Tot. Pub. Exp

(C + S)> Annual Per capita GDP

Contributory ~ 4.25 % of Popln< 0.1 % of Federal

Govt. Exp.< Poverty line (from

EPFO)

Age-Groupwise Percentage Distribution of Workers and Pensioners (Federal Government)

Age Groups in Years AllCivil Defence

% Nos. in Lakh % Nos. in Lakh

Wo

rkers

≥ 20 and < 30 22.4

33.02(of which 21.88

arepre-01-01-04)

(Post-01-01-0434 %)

≥ 30 and < 40 22.3

≥ 40 and < 50 26.0

≥ 50 and < 60 28.7

Others 0.6

Pen

sioners

> 60 and < 70 37.2 47.2

33.36(7.01 FamilyAbout 21 %)

19.2

18.6(4.82 FamilyAbout 26 %)

> 70 and < 80 25.5 30.8 16.0

> 80 and < 90 8.9 10.7 5.5

> 90 and < 100 2.3 2.2 2.3

Others 26.2 9.0 56.9

As

on 0

1.01

.20

14

Summary• System dependency ratio in public sector exceeds 1 (more retirees or pensioners than

workers)• Age dependency ratio (for India) appears favourable, but economic dependency (non-

workers to workers ratio) has not shown any improvement.• Social pensions cover less than 12 per cent of poor.• Social pensions are markedly deficient to address poverty.• Labour employment in Public sector has declined – And, New civilian recruits moved

out of PAYG system to contributory system.• Optimistic estimate for coverage under any provident fund / pension system is less

than 15 per cent of workforce• But, most contributory systems are inadequately funded or inadequately protected.• High replacement ratio for those in PAYG, but very low for those in contributory

systems.• Expectation of life has improved (decline in fertility rate, decline in mortality) –

Further, expectation of life at older ages has risen more – With unchanging age of superannuation, this raises the passivity ratio (number of years in retirement / number of years at work).

Tentative Suggestions on the Way Forward

• To reduce errors of omission and commission• With current allocation of resources type-I error (error of omission, exclusion of eligible)

is high.

• But type-II error (error of commission, inclusion of ineligible) is also high because of inadequate socio-economic mapping.

• At this stage, resist temptation to convert all in-kind benefits into cash benefit / income transfer

• Benchmark social pensions (assistance) to poverty line (say, at least at 2/3rd of poverty line)

• Pare / rationalise benefits under the PAYG system – track life time cost of employee – incentivise complete shift to contributory system

• Encourage work force participation – raise mandatory age of superannuation –(?) synchronise with expectation of life at average age of joining work

Summary: NSAP- Coverage, Funding, and Benefits

• Upon comparing the number of beneficiaries with potentially eligible poor persons, the coverage under OAPS (22.7 million) appears to be satisfactorily close to target (22.8 million). However, coverage in WPS (4.9 million) appears to have surpassed target (3.9 million), while coverage in DPS (0.74 million) seems significantly below target (5.9 million).

• NSAP covers almost 2.4 per cent of the population, but total expenditure on this programme is unlikely to exceed 0.70 per cent of the combined expenditure of federal and provincial governments.

• It appears that NSAP may be afflicted by high probability of errors, both of Type I (of omission of deserving persons) and Type II (of inclusion of undeserving persons).

• Total (federal plus provincial) assistance provided to individual beneficiaries, in several provinces falls significantly short of even the rural poverty line of INR 816 (monthly per capita expenditure).

Summary: Non-contributory Schemes - Coverage, Funding, and Benefits

• The non-contributory pension programme covers a large section of public sector workers constituting less than 2.5 per cent of extant 463 million Indian workers.

• Average annual pension benefit in the public sector exceeds per capita GDP. Retirement benefits for public sector ex-workers account for more than 7.2 per cent of combined public expenditure of the federal and provincial governments.

• Some provinces namely, Kerala, Himachal Pradesh, Punjab and West Bengal are facing an acute burden on account of expenditure on retirement benefits that exceed one-sixth of their total expenditure.

• In 19 provinces, out of 28 in 2012-3, expenditure on retirement benefits exceeded interest payments, and emerged as the most critical element of public expenditure.

Summary: Contributory Schemes - Coverage, Funding, and Benefits

• Domain oversight over contributory schemes is exercised under different legislations that are specific to employees in a region or sector (for example, J & K, Coal Mines, Assam Tea Plantations, Seamens etc.). Most of these face a decline in membership.

• Only contributory schemes under the oversight of EPFO and PFRDA report a rise in membership.

• A careful reading of legislative domains for the contributory schemes suggests that these effectively exclude self-employed and casual labourers from its ambit of mandatory participation.

• The objective of social security is ill-served by continuing with a plethora of legislations when membership in sector / region specific provident funds is dwindling, but the workforce has expanded considerably. There appears to be a strong case to consolidate the region and sector specific provident fund legislations under some umbrella legislation that may offer protection to a wider work-force.

DescriptionRural Urban

Male Female Male Female

Self Employed 55 59 42 43

Regular Wage / Salaried 10 6 43 43

Casual Labour 36 35 15 14

Total 100 100 100 100

Classification of workers by type and region of employment, and Gender

Those in regular wage or salaried activities constitute less than eight percent of workers in rural areas. The corresponding number in urban areas is significantly higher at 43 percent. Note that these persons drawing a regular wage / salary are the ‘potential’ workers who could, at best, hope to be covered under largely ‘employment linked system of pension benefits during old age’. This potential for combined rural (26.5 mn) and urban (56.9 mn) areas is estimated at 83.4 mn persons or 18 per cent of workers. In other words this is the maximum possible coverage (potential) in wage / salary linked schemes (both non-contributory and contributory) including private sector participants of NPS and voluntary members of EPF.

Summary: Contributory Schemes - Coverage, Funding, and Benefits

• The mandates are administered as employer-employee co-contributory schemes. Theoretically then, the maximum possible coverage (potential) in wage / salary linked schemes (both non-contributory and contributory) including private sector participants of NPS and voluntary members of EPF may not exceed 83.4 million.

• In 2012-3, there were 80.8 million accounts in the pension scheme administered by the EPFO.

• The annual pension benefit to a retiree emerging out of the EPFO system appears to fall short of the annualised poverty line.

• Latest valuation report of the pension scheme of EPFO for year 2008-9 suggests underfunding to the tune of INR 616 billion (almost 57 per cent of the corpus).

• Federal government contribution to all contributory schemes is unlikely to exceed 0.1 per cent of its total expenditure.

• Rate of contribution (for example in EPFO scheme) has been periodically ratcheted-up. But no attempt is made to pare benefits. This arrangement connotes a continual increase in taxation of successive younger members joining the scheme.

Population Pyramid: Rebus Sic Stantibus (Latin for ‘Things Thus Standing’)

19.58

13.64

11.85

3.37

3.46

18.18

12.96

10.76

2.99

3.21

25 20 15 10 5 0 5 10 15 20 25

0-14

15-29

30-49

50-59

60+

Percent

Ag

e In

terv

al i

n Y

ears

INDIA 1991

Female Male

16.05

14.28

12.99

3.74

4.22

14.71

13.25

12.49

3.54

4.36

25 20 15 10 5 0 5 10 15 20 25

0-14

15-29

30-49

50-59

60+

Percent

Age

In

terv

al i

n Y

ears

INDIA 2011

Female Male

12.38

12.80

15.54

5.03

6.11

10.99

11.52

14.17

5.21

6.31

25 20 15 10 5 0 5 10 15 20 25

0-14

15-29

30-49

50-59

60+

Percent

Ag

e In

terv

al

in Y

ears

INDIA 2026

Female Male

21.69

12.25

11.51

3.28

3.08

20.33

11.72

10.43

2.80

2.89

25 20 15 10 5 0 5 10 15 20 25

0-14

15-29

30-49

50-59

60+

Percent

Age

In

terv

al i

n Y

ears

INDIA 1971

Female Male