Old Time Future in India

Life expectancy in India has more than doubled since independence – from about 32 years in the late 1940s to 70 years or more today. Many countries have done even better, but this is still a historic achievement. Over the same period, the fertility rate has dropped from about six children per woman to just two, freeing women from the shackles of having to have children over and over again. This is all good news, but it also poses a new challenge – aging of the population.

The share of the elderly (persons aged 60 years and above) in India’s population, close to 9% in 2011, is growing rapidly and may reach 18% by 2036, according to the National Population Commission. If India is to ensure a good quality of life for the elderly in the near future, planning and providing for it must start from today itself.

pension assistance

Recent work on the mental health of the elderly in India sheds new light on their critical condition. The evidence on depression from a collaborative survey by the Abdul Latif Jameel Poverty Action Lab (J-PAL) and the Government of Tamil Nadu is particularly telling. Among individuals aged 60 and over, 30% to 50% (depending on gender and age group) had symptoms that made them likely to be depressed. The proportion of symptoms of depression is much higher for women than for men, and increases rapidly with age. In most cases, depression remains undiagnosed and untreated.

As one might expect, depression is closely related to poverty and poor health, but also to loneliness. Among the elderly living alone, in the Tamil Nadu sample, 74% had symptoms that classified them as mildly depressed or likely to be worse on the Small-Giatric Depression Scale. A large number of elderly people living alone are women, mainly widows.

The hardships of old age are not only related to poverty, but some cash often helps. Cash can certainly help to deal with many health problems, and sometimes even to avoid loneliness. The first step towards a dignified life for the elderly is to save them from desperation and all the deprivation that comes with it. This is why old age pensions are an important part of social security systems around the world.

There are important schemes of non-contributory pension for the elderly, widowed women and persons with disabilities under the National Social Assistance Program (NSAP) administered by the Ministry of Rural Development in India. Alas, eligibility for NSAP tends to be limited to “below the poverty line” (BPL) families, some of them as young as 20, based on outdated and unreliable BPL lists. Furthermore, the central contribution to old age pension under the NSAP has remained stagnant at a small ₹200 per month since 2006, with a slightly higher but still modest amount (₹300 per month) for widows.

Many states have increased the coverage and/or amount of Social Security pensions beyond NSAP norms by using their own funds and plans. Some have even achieved “near-universal” (75%–80%) coverage for widows and elderly persons. For example, this is now the norm in all southern states except Tamil Nadu – an odd exception as Tamil Nadu has been a leader in social security.

beyond target

It is always difficult to “target” social benefits. Limiting them to BPL families hasn’t done well: the BPL list has huge exclusion errors. When it comes to old age pension, targeting is not a good idea in any case. For one thing, targeting is based on household rather than individual indicators. However, a widow or elderly person may experience great deprivation even in a relatively affluent household. Pensions can help them avoid excessive dependence on relatives who may or may not take good care of them, and it can motivate relatives to be more considerate.

For another, targeting involves complex formalities such as submission of BPL certificates and other documents. This has certainly been the experience with NSAP Pensions. The formalities can be particularly fraught with low-income or low-education elderly individuals who are in greatest need of pensions. In the sample from Tamil Nadu, eligible persons left out of pension schemes were found to be poorer than pensioners (more than just pension). Furthermore, when a list of exempt, potentially-eligible individuals was submitted to the local administration, very few were approved for pensions, confirming that they faced flexible constraints in the current scheme of things. Huh.

The problem is usually not a lack of effort or goodwill on the part of government officials. Rather, many have embraced the idea that their job is to save government money by ensuring that no ineligible person becomes eligible by mistake. In Tamil Nadu this often means, for example, that if the applicant has a capable son in the city, they may be disqualified even if they get any support from their son. To avoid inclusion errors, many executives are less concerned about exclusion errors.

A better approach is to consider all widows and elderly or disabled persons as eligible, subject to simple and transparent “exclusion criteria”. Self-declaration of eligibility can also be done keeping the burden of time bound verification on the local administration or Gram Panchayat. There may be some fraud, but it is unlikely that many privileged families would risk trouble for a small monthly pension. And it’s much better to accommodate some of the inclusion errors than to maintain the widespread exclusion errors we see in targeted pension plans today.

mesh extension

The proposed move from targeted to near-universal pensions is not particularly new. As mentioned earlier, this has already happened in several states. Of course, this requires a larger pension budget, but the additional expense is easy to justify. India’s social assistance schemes have a low budget and a huge gap for a large number of people (about 40 million under the NSAP). They deserve to be expanded.

An example may help. In Tamil Nadu, the social security pension (usually ₹1,000 per month) is targeted and covers about a third of all elderly persons and widowed women at a cost of around ₹4,000 crore per year. If, instead, 20% were to be excluded and the rest were eligible in default, the cost would rise to ₹10,000 crore per annum. This would be a modest price to pay to ensure a modest amount of economic security for all in old age. This will be a fraction of the Rs 40,000 crore that Tamil Nadu is expected to spend this year on pension and retirement benefits for government employees – barely 1% of the population. If the transition cannot be done at once, there is a strong case to start with women (widow or elderly), who often face particular disadvantages. It will also be a step towards fulfilling the Tamil Nadu government’s promise of a ₹1,000 “home grant” per month for women.

Southern states are relatively well-endowed, but some of India’s poorest states (such as Odisha and Rajasthan) also have near-universal social security pensions. If the central government reforms the NSAP, it will become very easy for all the states to do so. The NSAP budget this year is just ₹9,652 crore – more or less in terms of money than it was 10 years ago, and much less in real terms. This is not even 0.05% of India’s GDP!

Social Security pension is, of course, the first step towards a dignified life for the elderly. They also need other supports and facilities such as health care, disability support, assistance with daily tasks, opportunities for recreation and a good social life. It is an important area of ​​research, policy and action for the foreseeable future.

Jean Dreze is a visiting professor in the Department of Economics, Ranchi University. Esther Duflo, Nobel Laureate (2019), Professor of Poverty Alleviation and Development Economics at Massachusetts Institute of Technology