SOCIAL SECURITY IN

INDIA

COUNTRY PAPER
PRESENTED BY
DR MAHENDRA RAJU AMBATI

DIRECTOR
NATIONAL ACADEMY FOR TRAINING AND
RESEARCH IN SOCIAL SECURITY

DEMOGRAPHIC & ECONOMIC

INDICATORS OF INDIA
DEMOGRAPHIC INDICATORS

POPULATION
CHILDREN
WORK FORCE
NON WORKING (OLD AGED ETC.)
COVERED IN THE FORMAL
SOCIAL SECURITY SYSTEMS
(viz EPFO/ESIC/GPF/CSPS
of private, public & Govt sectors)
COVERED IN THE INFORMAL
SOCIAL SECURITY SYSTEMS
(viz micro insurance etc
National Old Age Pension Scheme
UNIVERSAL SOCIAL ASSISTANCE
(Public Health/Education Etc)
Rural Employment Guarantee Scheme
( including PWD Works All over India)
LIFE EXPECTANCY

:
:
:
:

1.2 BILLION
41% of Population
40% of Population
19% of Population

14% of Work Force

:
:
:

8% of Agri Labour
2% of Old Aged
85% House Holds

25% Work Force

69 Years

ECONOMIC INDICATORS
INDIA RISING

RATE OF GDP GROWTH

RATE OF INFLATION
STOCK MARKET SENSEX CROSSED

( source : news paper reports )

: 9.5 %
: 3.5 %
: 19,000 POINTS

SOCIAL SECURITY SYSTEM IN INDIA

The segment of the
Formal Private Sector
Participation in two social insurance programs is
mandatory for workers in establishments with more
than 20 employees who earn less than Rs 6,500 a
month.

These workers constitute 49 percent of the

salaried work force and slightly more than 7
percent of the estimated total work force.

Formal Social Security Sector

Two funded pension schemes :
1.
2.

the Employment Provident Fund (EPF), a defined-contribution

program, and
the Employment Pension Scheme (EPS), a defined-benefit program

Both overseen by the Employees Provident Fund Organization

(EPFO) INDIA

Employees Provident Fund Scheme was established in 1952 and

participation is mandatory for private and public enterprises in 177
specified sectors that employ more than 20 persons

As of March 2006 the EPF covered about 43 million workers in 4,44,464

establishments

As of end-March 2006, total corpus in EPFO was US$ 50 billion

Which makes nevertheless EPFO a worlds largest social security

organization

Employees Pension Scheme.

The EPS was established in 1995.

As of March 2006 it covered about 20.5 million workers.

The EPS is currently funded by employer of 8.33 percent of

employees' basic wages plus dearness allowance.

The EPS provides pension benefits that are calculated

1.
2.

On the basis of a worker's average salary in the 12 months preceding

retirement, and
A multiplicative factor calculated as years of service divided by
seventy.

The maximum replacement rate is 50 percent,

As of end-March 2006, accumulated funds in the EPS were

US$ 20 billion.

EMPLOYEES PENSION SCHEME

COVERAGE

Organised Sector

All public sector undertakings

All Cooperative sector units
All joint sector units
All private sector units viz.,

Factories
Hospitals
Hotels
Educational institutions so on so forth

Un Organised Sector
Building & construction
Agriculture Farms
Horticulture Farms
Dairy farms
Plantation workers viz
( Tea coffee rubber cashew etc )
so on so forth

EMPLOYEES PENSION SCHEME

BENEFITS
Pension for life to the member on superannuation/retirement
and invalidation.
Pension to Widow/Widower for life or till re-marriage.
Two children/orphan, two at a time additionally up to 25
years of age simultaneously with widow/widower pension for
five children.
Children/orphan with total and permanent disability pension
or orphan pension irrespective of age and number of children
in the family.
Facility for payment of pension to nominee in the event of
member who is unmarried
Facility for payment of pension to dependent father/mother in
the event the member dies leaving behind no eligible family
members and no nomination
Commutation of pension up to 1/3rd of pension

EMPLOYEES STATE INSURANCE

COVERAGE

All factory units

All establishments

No. of Insured employee family units about one million

Total No. of Beneficiaries 36 million

Benefits

Medical Benefits
Sickness Benefits
Maternity Benefits
Disablement Benefits
Temporary disablement benefits
Permanent disablement benefits
Dependants Benefits
Funeral Expenses
Medical Benefit to Retired Insured Persons

Rehabilitation allowance including

Cash Benefits are disbursed by its Local pay offices

Vocational Rehabilitation

Unemployment Allowance

Civil service pension system

The CSPS covers federal and state civil servants, a workforce
of over 12 million
Workers make no contributions, and benefits are financed
directly from the respective federal or state government
budgets.

The CSPS pays a retirement benefit at age 60 that is based on

years of service and average salary in the last year of service.
The accrual rate is slightly over 1.5 percent replacement per
year of service, so that a worker with 33 years of service will
get a 50 percent replacement of final salary, as in the EPS.
Within the central government, pension schemes are in place
separately for railways, telecommunications, defence etc.

Special provident funds

with family pension benefits

There are also some

mandatory provident funds linked to
specific occupations or states, such as
The Coal Miners Provident Fund

The Assam Tea Plantation Provident Fund

The Jammu & Kashmir Provident Fund
The Seamen s provident Fund

Although managed by different trusts and fund managers, they all

generally follow the same investment and return rules as those funds
regulated by EPFO.

Total membership in these schemes is roughly 2 million.

Total corpus is around US $ 10 Billion

Voluntary Pension programs for

the formal sector
There are also a number of voluntary group pension plan
that exist primarily because of rules barring high earning
employees from participating in the EPF system.

These pension schemes are either privately run by managers

appointed by employers, or annuities are run by the Life
Insurance Corporation (LIC).
Although they are neither mandatory nor sponsored by the
government, they are mentioned here because they receive tax
preferences and because they are subject to restrictive
investment and annuity regulations.
As of March 1998, the total accumulated funds for these group
pension plans was about US$15 billion

The Informal Social Security

Sector

Public
Provident
Fund
There are no mandatory retirement-saving programs for the
self-employed or for workers in the informal and unorganized
sectors of the economy these workers can join the Public
Provident Fund (PPF).
Members of the PPF can contribute between US$25 and US$
500 per fiscal year, and PPF accounts mature in 15 years.
As of March 1998, there were 2.76 million accounts in the
PPF, representing less than one percent of the working
population with total outstanding balances of approximately
US$15 billion.
National Old Age Pension Scheme
NOAPS provides a benefit for the poorest workers of 65 years
of age in the informal sector.

MICRO INSURANCE (SOCIAL SECURITY)

FOR INFORMAL SECTOR
( ADMINISTERED BY CENTRAL & STATE GOVTS )
DELIVERED BY DISTRICT MAGISTRATES IN THE STATES
COVERAGE

Agricultural Labour
Fisher men
Domestic helps
Rickshaw pullers
Toddy tappers So on so forth

BENEFITS

Disability pension for life

Widow pension for life

UNIVERSAL SOCIAL ASSISTANCE /

SOCIAL PROTECTION PROGRAMS

( ADMINISTERED BY CENTRAL & SEVERAL STATE GOVTS )

BENEFITS

Free Medical & Health ( Govt Hospitals / Primary health

centers all over the country
Free Education up to high school ( Govt schools all over the
country)
Free Education for girls up to college ( Govt colleges all over
the country )

Free Power to small farmers for agricultural purposes

Free Power to single room tenements for low income groups

Mid Day Meal in schools to children of low income families

UNIVERSAL SOCIAL ASSISTANCE /

SOCIAL PROTECTION PROGRAMS

( ADMINISTERED BY CENTRAL & SEVERAL STATE GOVTS )

BENEFITS

Free transport in local trains / busses for old aged & physically
handicapped of any age

Concessional ( half price ) fares in trains / busses any where in

the country for old aged & physically handicapped of any age
Marriage allowances in kind for low income group
Reservation for women up to 33 % in all jobs and for socially
oppressed class up to 15 % in all jobs all over the country

RURAL EMPLOYMENT
GURANTEE PROGRAM
National Rural Employment Guarantee Program
promises wage employment to every rural household
(adult volunteers get unskilled manual work @ Rs 60/
per day per person)
Through this Program the Government aims at
removing poverty by assuring at least 100 days'
employment
Public Works Department is another Rural
Employment Guarantee Program in place which
guarantees employment to rural unemployed population
through deploying Labour in Roads & Building
activities all over India.

RECOMMENDATIONS

by the presenter :

some of them presented before

EPFO/GOVT

ON COVERAGE

Let there be ( central registration authority ) for issue of social security

number
Let all employees get SSN to start with whether covered by EPFO or not
Then on ongoing basis let every citizen get SSN from that central
registration authority
Once every employee gets SSN, it becomes easy for EPFO to track
uncovered employees either from organised or unorganised sectors and
then to go for universal membership near total
ON INVESTMENT PORTFOLIO

Open up limited investments into equity very cautiously in proven stock

options on test basis
Venture into real estate/leasing investments/trading

RECOMMENDATIONS by the presenter :

some of them presented before EPFO/GOVT

contd

ON DIVERSIFICATION OF BUSINESS OPPORTUNITIES

FOR MAKING SOCIAL SECURITY SYSTEM MORE ROBUST
Venture into fallowing activities

Life & General Insurance

Stocks Trading
Housing & Development Finance
Banking
Venture Financing
Mutual funds
Real estate
Leasing finance & development

RECOMMENDATIONS by the presenter :

some of them presented before EPFO/GOVT
contd
(ON CONSOLIDATION /UNIFICATION OF SOCIAL SECURITY SYSTEMS)

Let there be new central ministry called MINISTRY OF SOCIAL SECURITY AND
SOCIAL PROTECTION
Let all the special PF s ( Coal mines/seamen s etc ) be merged into EPFO for uniform
benefit delivery
Let ESIC & EPFO be merged for uniform and efficient benefit delivery
Let all the micro insurance/social assistance programs & NOAP also be merged
Let all the above be under one umbrella for effective benefit delivery

Let all the social protection delivery mechanisms in STATE GOVTS viz.

Maternity benefit act provision

Workers compensation act provisions
Contract workers abolition act provisions
Mining workers welfare act provisions
Beedi & cigar workers welfare act provisions
Domestic workers welfare act provisions of certain state Govts
so on so forth also be brought under one umbrella as suggested
under one CENTRAL MINISTRY OF SOCIAL SECURITY for uniform
efficient benefit delivery

If my above recommendations are accepted

by GOVT..

Social Security System in INDIA can be

More income generating
Less vulnerable
More sustainable
Better benefits
Commensurate with rate of inflation and finally
Raise standards of living of the beneficiaries on ongoing basis

THANK YOU