New schemes to aid equitable growth

The three social security schemes in the insurance and pension sectors that Prime Minister Narendra Modi launched recently come with all the populist noises that surround announcement of state welfare programmes. The rhetoric surrounding these schemes, be they of optimism or apprehension on their reach and sustainability should not hijack the focus on what essentially is a welcomestep in addressing issues that open up possibilities of equitable development. 

Insurance penetration in the country, measured in terms of premium paid as percentage of Gross Domestic Product, was 3.9 per cent in 2013 while the global average for the year was 6.3 per cent. The country’s pension schemes cover only 11 per cent of its workforce. These are figures that should steer any debate on schemes that propose to facilitate affordable social security. The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) offers a life insurance cover of Rs 2 lakh at an annual premium of Rs 330 to all savings bank account holders between 18 and 50 years. The Pradhan Mantri Suraksha Bima Yojana (PMSBY) offers a renewable accidental death and disability cover for death or disability on account of an accident at an annual premium of Rs 12; all savings bank account holders between 18 and 70 years are entitled to join the PMSBY. The Atal Pension Yojana (APY) is pegged to what the government calls its continuing policy to encourage savings for retirement among workers in the unorganised sector. The scheme offers subscribers who join between the age of 18 and 40 a fixed monthly pension from 60 years ranging from Rs 1,000 to Rs 5,000 – the variation is based on the plan selected.

With the APY, the government has taken forward the Swavalamban pension scheme launched by the United Progressive Alliance government in 2010-11. There is however some difference. The earlier scheme does not “guarantee” pension benefits at the age of 60. The government has also offered provisions for migration of existing Swavalamban subscribers to APY. Banks have reportedly enrolled 5.05 crore people during a seven-day trial run of the three schemes. Beyond the buzz around a nationwide launch and approving nods from India Inc., the government will have to back intent with concerted action. There are apprehensions on funding models being adopted for the schemes and the reach they propose to achieve. But in essence the three schemes mark an apparent policy shift – from aid to empowerment – and a small, yet significant step forward on the road to stronger, more inclusive social infrastructure.