Dreze: India’s safety net is still very patchy
Of course, such directives are now being contested at the Supreme Court by small business owners for being both illegal and un-constitutional. But the fact remains that while India waffled on providing immediate relief to its workforce, most western nations that also imposed lockdowns had well-thought out strategies in place: They had offered wage subsidies to industry to keep workers on the rolls, deferred retirement contributions, waived utility bills and offered special credit lines and guarantees. India needed to do likewise. This was apart from other benefits flowing from well-designed social security systems. In the United States, 22 million filed for unemployment claims in the first three weeks of April.
The directives issued to private employers in India post-lockdown raise a larger question: is it fair to expect private businesses alone to foot the social security bill for events like the lockdown?
After all, the stringent lockdown posed an existential threat to large swathes of India’s workforce, requiring urgent ameliorative measures. Expecting private businesses to somehow foot the bill displayed a lack of basic understanding on how businesses operate. This lockdown led to zero revenues for most businesses, creating unprecedented working capital stress. Lack of orders and cash flows pushed most of the MSMEs to the brink, with no means to pay even utility bills leave alone full wages. Business owners in sectors such as retail trade found themselves in dire straits.
This was because over 60 per cent of Indian businesses in the informal sector are own-account enterprises. The government must surely have known that. It took some time for the government to stop passing the buck on the crisis that was unfolding to announce in driblets a package for workers and businesses debilitated by the lockdown.
While the intent to provide social security, perhaps even a universal social security cover or universal basic income (UBI), is laudable, the issue of who will provide the funds must be weighed in and resolved first. For instance, it is estimated that the implementation costs of a universal social security cover for 500 million workers will require at least Rs2 lakh crore when the scheme is fully rolled out for the lower 40 per cent of the country’s workforce. That is provided the remaining 60 per cent make contributions out of their own pocket, either fully or partially. Asking the private sector alone to cough up huge sums when the sector’s animal spirits are still dormant does not seem to make sense, though private sector does indeed have a role to play.
A social security fund via a special purpose vehicle to cater specifically to migrants working in the unorganised sector is another measure being contemplated
In this connection, the sympathetic tone of statements coming from several business leaders is instructive. Uday Kotak, the new president of Confederation of Indian Industry, feels the ‘short-term orientation’ of some parts of industry towards labour needs to change and that they (labour) needed to be provided with social security. Niranjan Hiranandani, president, NAREDCO, points out that if migrant labour had permanent homes, they might not even have left the cities they lived in. So if governments give impetus to the concept of housing for migrants and other labourers, it will actually be helpful in driving the growth story of the country.
Crafting the plan
So how should one go about crafting a plan? Since any widening of the fiscal deficit (in the event of the government affording the majority of burden of social security) will fuel inflation and further sink growth, the plan could be funded by axing inefficient subsidies – such as subsidised urea and free power to farmers offered by many states. Many developed countries extend coverage to the unorganised sector under separate funds, or bring them gradually under the general system. In some countries, non-covered workers become eligible for the right to an eventual pension if they make voluntary contributions at a specified level. India needs to study these models carefully.
The solution possibly lies in a graded, cafeteria kind of social security scheme. If all those who are enrolled have to be contribute to get the benefit of a UBI, then those at the bottom should get the benefit of a low contribution, perhaps even as low as Rs10 a month. It is a misconception that the poor cannot set aside small sums every month. The poor need a safe place for their savings and Modi should use whatever good will he still has with the poor to sell this idea.
After the recent humanitarian crisis blew up on our faces, it is clear as daylight that vacuous debates (like lives versus livelihood) will no longer suffice to tackle public angst. Jean Dreze, economist and one of the architects of Mahatama Gandhi National Rural Employment Guarantee Act (MGNREGA), points out, “Unfortunately, the idea that India needs a social security system is often greeted with cynicism, reflected in disparaging terms such as mai-baap sarkar [paternalistic state] and nanny state. One lesson of the current crisis is that it is time to shed this cynicism.”
Hiranandani: housing is crucial
There is little doubt that successive governments have used social security a mere expression of political rhetoric. Take the case of Unorganised Sector Worker’s Social Security Act, 2008 under which the UPA set up a National Social Security Fund (NSSF) for unorganised sector workers in 2010-11 with an initial allocation of Rs1,000 crore. Such a fund could have come in handy now. However, during the years 2010-11 to 2014-15, successive finance ministers kept announcing budgetary support for the corpus. But the funds were never used.
The CAG audit report on Union government accounts 2016-17 stated that funds lying in the NSSF could not be utilised since its inception and unutilised fund accumulated to Rs1,927 crore. In fact, during the fiscals 2015-16 and 2016-17, the finance ministry did not bother to transfer even a single rupee to NSSF, not did it even make a lip service of making budgetary allocation.
Even recently, when the Modi government thought of cash transfers in the accounts of 50 lakh-odd construction workers accounts under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), only about one-third of construction workers in India had managed to get the benefit by the last week of June. Apart from Bihar, Chhattisgarh and Jharkhand, where none of the estimated 6.7 million construction workers got cash transfer benefits, the coverage of the construction workers was the lowest in Delhi, where only about 5 per cent of the estimated workers received cash under the PMGKY, followed by Kerala (15 per cent) and Uttar Pradesh (22 per cent), among major states.
This is despite the fact that Union labour and employment minister Santosh Kumar Gangwar had promised a “mission mode project’’ to cover all eligible construction workers and provide a social security umbrella to them. The social security benefits planned for construction workers included subsistence allowance for use during the pandemic.
However, it is not that attempts were not made. MGNREGA, enacted in 2005, was once hailed the world’s largest welfare programme for rural labour. But the excitement and high hopes of radical change in power relations, or of dramatic poverty reduction, have not quite materialised. This was because the implementation of the law has fallen short of its letter and spirit. Even so, the enactment of MGNREGA was a very significant development in many ways – as the law continues to be a major salve for easing rural distress.
After the recent humanitarian crisis blew up on our faces, it is clear as daylight that vacuous debates (like lives versus livelihood) will no longer suffice to tackle public angst
In 2015, Modi himself had launched three social security schemes, namely Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) – all initiatives aimed at providing affordable universal access to essential social security protection by way of insurance and pension. Post-Covid-19, Modi launched the Garib Kalyan Rozgar Abhiyaan, which is to be implemented on a mission mode in 125 days in 116 districts of six states – Bihar, Madhya Pradesh, Uttar Pradesh, Rajasthan, Jharkhand and Odisha – that received the maximum numbers of migrant workers back. The government is also working on the one nation, one ration card scheme to ensure that subsidised food is available to the needy irrespective of one’s dwelling. The emergency ration scheme, under the Pradhan Mantri Garib Kalyan Anna Yojana, will now be extended till November.
Indeed, the fear of the current economic distress having a serious political fallout among the poor is forcing the government to seriously revisit the issue of social security. All eyes are on the Code on Social Security Bill 2019, currently being vetted by a parliamentary standing committee on labour. There are reports that the committee is studying a portable social security number of migrant labour and other employees in the unorganised sector. The social security number would be linked to Aadhaar. A social security fund via a special purpose vehicle to cater specifically to migrants working in the unorganised sector is another measure being contemplated.
The fund, as per deliberations on the draft social security code, could be completely funded by the Centre, or the Centre and states could jointly share it.
Labour laws jumble
The Code of Social security Bill has undergone a serious metamorphosis since it was first tabled. Its initial aims were entirely different. Currently there are almost 50 Central labour law legislations that are in force in our country. The Bill proposed to amalgamate nine of the key ones (see box: Codified law) into four Labour Codes. These Codes aimed to simplify the labour law compliances which will in turn help these businesses to target their resources towards the development of the industry instead of complicated labour law compliances.
The government had till now maintained that this was being done in order to simplify the labour law regulations as a facilitator to encourage the growth of industry in the country in pursuit of the ‘Make in India’ initiative and also to improvise the ease of doing business in India. However, with the migrant workers’ crisis seriously affecting the Bharatiya Janata Party-ruled states of Uttar Pradesh, Madhya Pradesh and Bihar, a new spin is being put on the legislation.
It is being said by official sources that the latest initiative is part of an overall effort by the Modi regime towards creating a social security framework for the country, an effort which began when Modi in 2015 launched three social security schemes, namely PMJJBY, PMSBY and APY. It was then claimed that once the linkages of three social security schemes with bank accounts were established, it will go a long way in expanding penetration of insurance and pension in the country.
The latest initiative is part of an overall effort by the Modi regime towards creating a social security framework for the country, an effort which began when Modi in 2015 launched three social security schemes, namely PMJJBY, PMSBY and APY
Failed to take off
It is a different thing that some of these schemes were not properly framed. Take the case of PMSBY, which offered a renewable one year accidental death-cum-disability cover of Rs2 lakh for partial/permanent disability to all savings bank account holders in the age group of 18-70 years for a premium of Rs12 per annum per subscriber. The scheme drew a massive response but led to huge losses for insurers. As on 6 December last year, the total number of persons enrolled for the scheme stood at 170.3 million, while the number of claims addressed was 36,152. Given the premiums paid per person is Rs12, insurers would have received a total premium of Rs204 crore. However, since the claim per person is Rs2 lakh, the amount disbursed was Rs723 crore for 36,152 persons! With claims expected to rise every year, insurers have been asking the government to increase the premium under the scheme – but with no luck.
Jean Dreze points out that India already has some important elements of a social security system, such as the MGNREGA and the National Food Security Act (NFSA). “These schemes have served the country reasonably well in this crisis. Thankfully, the public distribution system was in place before the lockdown began, making it possible to provide enhanced food assistance to more than 800 million people without delay. Similarly, the MGNREGA started employing tens of millions of impoverished rural workers as soon as the worksites reopened in May.”
However, he feels India’s safety net is still very patchy, with large numbers of poor households excluded from the PDS, employment guarantee an elusive goal in many states, limited coverage of other social security schemes such as old-age pensions, and meagre benefits all around. “Very little has been done, in the last few years, to plug these gaps and consolidate the foundations of social security in India. Had there been more progress in this field, the country would have been better placed to handle the lockdown,” Dreze adds.
Change with experience?
Will things change with the benefit of experience? It is now being proposed that the laws be tweaked to ensure more unorganised sector workers get some form of social security cover through government funding – either under the EPF or the ESI scheme. But the Code on Social Security Bill 2019, introduced in Parliament by labour minister Santosh Kumar Gangwar, while seeking to cover 50 crore workers, has been criticised for being grossly inadequate. Critics say that the Bill fails to appreciate that provision of meaningful social security on such a massive scale is beyond the capacity of any single ministry at any single level of government, and that social security has to be fundamentally rethought, instead of creating a patchwork drawn from different extant laws.
Gangwar: will things change?
In India, social security has traditionally encompassed, apart from income security in retirement, child and family benefits, sickness and healthcare benefits, maternity benefits, disability benefits, old-age benefits, survivors’ benefits, unemployment benefits and employment guarantees, and employment injury benefits. Housing and education are key pre-requisites of such security, if not integral parts of it.
All these cannot be delivered by any single scheme or by any single department or ministry, to a population as large as India’s. Nor can these be delivered from the funds contributed by workers and their employers whether into the provident fund or into any corporate social responsibility fund. The present government seeks to provide healthcare to all and housing for all. These are to be funded by the exchequer. The central point of the argument is that there is an overlap between welfare policies of the government and social security narrowly conceived. This has to be sorted out.
Therefore, aver social scientists, it is essential to rethink social security from top to bottom. It should be envisaged holistically, its different components delegated to different arms and agencies of the government at all levels. Quality education that equips people to learn throughout their lives and regular upgradation of skills in this era of rapid technological obsolescence should also be part of it.
All these cannot be delivered by any single scheme or by any single department or ministry, to a population as large as India’s. Nor can these be delivered from the funds contributed by workers and their employers
Gig, platform workers also
The government, of course, maintains that the Social Security Bill introduced several new aspects for the welfare of those working in the unorganised as well as the organised sectors of the economy. It has widened the definition of “wages” and proposed setting up of social security organisations that will administer the various schemes. Gig workers have been introduced in this legislation for the first time. (This refers to workers outside of the traditional employer-employee relationship such as freelancers.)
Platform workers too have been included in this legislation for the first time. (This refers to workers who access other organisations or individuals using online platforms and earn money by providing them with specific services). Additionally, unorganised workers including home-based and self-employed workers have also been recognised as beneficiaries. It is being claimed that the Social Security Bill not only simplifies the complex nature of the labour law legislations currently in force, it also aims to modernise the legislation by including and acknowledging several contemporary aspects of the work culture.
As for the funding, the government is yet to develop clarity. In the long run, the goods and services tax (GST) – that has led to an increase in the taxpayer base and will subsequently boost collections – offers hope. Public finances will improve as large swathes of the informal sector come under GST and the economy starts looking up, providing fiscal space to meet welfare commitments. Reforms in direct taxes should complement this effort.
Also, with greater formalisation of the economy, all workers should be urged to contribute to the National Pension System (NPS). Employers’ contribution, too, would go to the NPS, which provides a regulated institutional framework for pension funds to manage retirement savings and generate superior returns. This will lower the burden on the exchequer. This is the kind of goal the government should strive towards.
The Code on Social Security Bill 2019 proposes to simplify, amalgamate, rationalise and replace the following central labour legislations:
• The Employees’ Compensation Act, 1923;
• The Unorganised Workers’ Social Security Act, 2008;
• The Payment of Gratuity Act, 1972;
• The Employees’ State Insurance Act, 1948;
• The Cine Workers Welfare Fund Act, 1981;
• The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952;
• The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;
• The Maternity Benefit Act, 1961;
• The Building and Other Construction Workers Cess Act, 1996