Yojana - July 2017 - Lessons for India

 8/10/2017  4450


On a global scale, social security finds mention in the UN Declaration on Human Rights, the 1952 convention of International Labour Convention, The Millennium Development Goals and the Sustainable Development Goals.
As per an ILO report, only 27% of world's population has access to comprehensive Social Security and the figures are even lesser for India. While most of the developed countries have a robust social security mechanism (for example, Finland is regarded to have the most advanced and comprehensive social security system in the world) there are a few challenges associated with social security initiatives that are common to all the developing and under-developed countries including India. These are -
Sustainability - As the population gets older and number of earning members in society fall, the financial/fiscal burden of social security rises. The governments around the world need to do fiscal planning to ensure that social security measures are fiscally sustainable and are dynamic as per the demographic changes.
Universalization - Developing countries tend to have very less provisions of social security and a small target population due to fiscal and economic constraints. The identification of target population remains a major challenge. Presence of vast number of workforce in the informal sector presents another challenge to universalisation.
Lack of institutional capacity in developing countries to implement social security schemes.

Some of the characteristics of social security systems around the world
• Almost all countries have included old age pension and retirement benefits for formal sector employees and provisions of minimum wages etc.
• Efforts to cover additional populations are sub-optimal and the coverage with most of the current benefits has been less than comprehensive and universal.
• There is general agreement to include health services as part of social security initiatives; however, only a few countries have set up mechanisms to progress towards universal health coverage.
• Many countries which are making good progress have attempted to converge schemes and integrate the implementation. In these settings, the providers have been separated from purchaser of these services and an (or more than one) independent and autonomous agency administers these provisions on behalf of the government.
• In federal structure, the provinces and states are the ones to design and implement schemes and national level provides policy guidance and rules and regulations to bring harmony.
• There have been innovative approaches, on the go modifications and learning, use of information and communication technology tools for optimal scaling up of these services. In addition, as and when needed, countries have supported these mechanisms by appropriate legislative and legal provisions.
• Countries having constitutions with explicit mention of social security provisions are far ahead in implementation of such measures than others.

What can India learn from all this?
India at 70 years after independence is a nation of young population (with potential for demographic dividend) and a fast growing economy, largely been unaffected by global slowdown. Perhaps, this is the most appropriate time that the existing social security system in India is strengthened. At this time the contributors to social security mechanisms are large while, dependants are less.
To start with, one of the strengths of social security measures in India is that the Constitution of India through Article 41 and 42, part IV discusses the security of right to work, education and assistance in case of unemployment, old age, sickness and disability. This is a robust legal framework to expand the social security measures.
In many senses, India can be considered an early starter for social security and as early as in 1923 the Workmen’s Compensation Act was enacted in India. The new schemes, with additional target populations, have been added to the list ever since and the overall scenario could appear impressive on paper.
However, the challenges in India (and Indian states) are similar to, as in any other parts of the world:
• Fragmented/overlapping schemes
• sub-optimal implementation
• poor targeting

In this context, India can take following steps to increase breadth and depth of social security measures in India-
? Develop and agree on a road- map for universalization - International experience suggests that there has to be systematic mechanism for inclusion of target beneficiaries, likely to be excluded otherwise. This would require establishing supporting institutional mechanisms as well as integration of many existing schemes to bring efficiency. The recent initiatives such as Aadhaar card and Jan Dhan Yojana could provide excellent platforms for social inclusion and should be proactively weaved into roadmap and framework for implementation.
? Consider establishing an autonomous national social security organization - A number of countries have set up an autonomous agency to administer most social security benefits/schemes. In India, there are multiple social security provisions which are being poorly implemented. Therefore, such an autonomous agency at both national and state level would bring efficiency and implementation effectiveness. This would allow government to formulate policy and agency to administer the provisions.
? Develop a social sector investment plan with innovative financing mechanisms - Experience shows that a country need not be rich to start on comprehensive and universal social security measures. Rather, investment in social security system could be facilitator of economic growth. It would be a immensely useful if a social security investment plan for next 15 or 20 years is developed with clear understanding of the resource requirement, giving due consideration to changing demographics. These could propose innovative and assured mechanisms for financial allocation to these schemes to ensure sustainability. If need be, mandatory contributions from select and target populations have to be implemented by constitutional and legal amendments. (through taxes, cess or surcharges)
? Focus on solidarity as well as public awareness and engagement - The solidarity is a key principle in social security system, where people commit to help those who are underprivileged and less fortunate. Rich stands for poor; educated stands for less educated and formal sector employees consider those either unemployed or are in informal sector. Solidarity can be brought through involvement of community in such initiatives as well through awareness generation efforts, which would also contribute to increased uptake of the existing schemes.
? Consider universal health coverage (UHC) as part of social security measures - In India, annually an estimated 63 million people fall into poverty due to health related Out of Pocket Expenditures (OOPE). People who are already below poverty line, go deeper into poverty. In other words, health related expenditure and lack of universal health coverage is undoing all social security efforts including efforts targeted for poverty reduction in the country. The OOPE by people at 65 per cent of total health expenditure is one of the highest in the world. It is well proven than when government invests on health, people have to spend less and it becomes a social security measure from poverty. In addition, investment on health contributes to high return on GDP and economic growth. Understandably, many countries have chosen the path of universal health coverage through social health insurance mechanisms as part of their social security system. The National Health Policy 2017 to some extent paves way for UHC in India.
? Proactive leadership by State governments - In India Social Security islisted under the concurrent list of seventh schedule and hence, the States have to play a major role in social security measures. This provides enough flexibility and window for innovations to make social security initiatives a success. Some of the economically well performing states can show the path to the rest of the country.
? Consider legislative and legal reforms - At some point of time, tax based financing has to be replaced with mandatory contributions from those who can afford to pay, efficient management of these provisions; else the sustainability would be a challenge. This has to be supported by legislative and legal provisions, if need be supported by constitutional amendments as global experience shows that these schemes are more effective when backed by legal or constitutional provisions.
It would be wrong to see social security as an expense on the part of public exchequer. Instead it is an investment that would contribute to rapid and sustained economic growth, poverty reduction and achievement of relevant sustainable development goals.
(Related article - Social Security: Global Scenario by Chandrakant Lahariya, Page - 48)

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