Public Expenditure on Old-Age Income Support in India: Largesse for a Few, Illusory for Most
Publication dateFeb, 2019
DetailsNIPFP Working Paper No. 253
AuthorsMukesh Kumar Anand and Rahul Chakraborty
Policy enunciation often remains hostage to a program-centric approach for planning and reform in developing countries. Old-age income support in India faces such a policy predicament. Extant studies deciphering related public expenditure thus carry limitations on (a) system expanse, (b) corresponding data collation, and therefore (c) depth of resource conscription. Benchmarking to the five-pillar architecture advanced by World Bank for old-age income support system, this paper traces (a) public expenditure, (b) average benefits, (c) workers included, and (d) elderly covered, under each pillar in India.
The constituents for respective pillars in India are heuristically identified and data on expenditure by federal and sub-national governments are collated or estimated using government finance accounts and annual reports. Workers and elderly covered under each pillar are estimated using data drawn from diverse sources on identifiable groups.
The study finds that, the extant system in India presents a larger and rising burden on sub-national governments, with implications for macroeconomic balance. In 2013-4 the elderly comprised 8.6 percent of the population and old-age income support system entailed 11.5 percent of public expenditure of combined federal and sub-national governments. Less than two percent of it constituted co-contributions in the nature of capital expenditure. Only 43 percent of 118.36 million elderly drew benefit from public expenditure and more than 85 percent workers remain excluded from the system. Including those drawing social pension, 70 percent of all beneficiaries collect less than the rural poverty line drawn at INR 11016 per annum.
The paper suggests (a) capping defined-benefit for exceptionally privileged, (b) reform of regulatory paradigm to harmonize contributory schemes, dissolve exclusive (section, sector, or region-based) approach and adopt inclusive principle to widen coverage, (c) unrequited sustained contribution by government for low-income earners and underprivileged, and (d) assimilation of information technology enablers for effective and efficient targeting of social pension. Pension policy reform anywhere, often faces arduous implementation, and extant processes in India merely tinker with inception of an essentially long gestation procedure.
Keywords: Pension in Developing Countries; Public Expenditure; Social Security System in India
JEL Classification Codes: H550, J140