Social security of India

By | 11:16 AM 1 comment
Here's something that i came across today as part of my work. Thats right .. and it makes me proud that my product has a social impact (when it comes out that is :) ). I read some articles on social security in India. India has 93% of its workforce in the unorganized / informal sector. This includes work like farming, weaving, key making, pan sellers, beedi rolling, etc. And a survey conducted puts the daily earnings of a sector of these workers at Rs. 30 - 50. The real problem comes because these people today have to social security to rely on when they fall ill, or have any problem that puts them out of work. They have no bargaining power also. For a lot of these workers, the only way to earn more money is to spend more time working. This is one of the reasons why labour is so cheap in India.

With globalization, we're used to a more formal approach of security, like the provident fund system. India had its own method of social security, where everyone had to contribute a portion of their income to temples and the temples would then help out the needy. Today such systems are thinning out, says the report. Most developed countries have a basic policy of social security where the government takes care of its people. The shocking bit is that India had in fact tried to bring in this policy change and it has been mentioned several times in Parliment that such a bill needs to be passed. But it never really has.

So what we have today is a state where the government doesn't take care of such a large section of its society which today accounts for more than half of its GDP. The social systems that were in place are slowly falling apart and such workers are left out in the cold. There is no way for them to form a collective union or voice. Also, there is no one really fighting for them. The paper argues that in a country like India a contributory providence scheme, where you must first pay in order to have a providence later, just will not work because these workers just do not have the money to start a provident fund. Although the provident fund seems logical, you save money for later .. it seems to completely leave out the people who are in dire need of social security.

So why is corporate India pushing for this kind of a scheme? Does it promote a system that actually widens the divide rather than narrow it? Would such a scheme give better security to those who already have it and leave those out who really need it? When will the government wake up to this... I wonder if economics can be used early on to predict such divides in society.

So if such a scheme is flawed at its roots, what then can India do to really provide social security at a grass root level ... Some schemes of micro-financing have started and are yielding some good resutls. You need to finance the farmer if you want him to even have a start. Its called start-up capital. What every businessman knows in his guts - you need money to make money. There just has to be a better way at that level to provide social security, and it doesnt come by taking something first.



BP said...

Social security at govt level in a country like India (with huge population problem) is an enormous task. I don’t think we have such huge finances at least for now. But What our Govt can do is to encourage Insurance companies (both Private and Public) to promote group schemes which can help these vulnerable sections of societies with as minimum contribution as Rs.1 per day per person, then Govt could contribute an equal amount or double that amount.

Micro-financing involving banks and NGOs should be encouraged for those who want to start small businesses in cities (Veg vendor, Chai wala, eco-lunch, etc.). Seed capital for Village based industries and rural enterprises can also help poor families to get jobs and not migrating to cities.