Pension plans that ignore elderly poor

India's official poverty line isn't age-specific. An alternative is to look at elderly who belong to Below Poverty Line (BPL) families. Estimates of UNFPA's Status of Elderly in Select States of India, 2011 showed that 49.1% (or 48% in rural areas and 52% in urban areas) belonged to the BPL households.

Further, the survey revealed that bottom 40% of the elderly population had no personal income, about 50% received just 0.43% of total personal income and top 10% of the population received 64.21%. Thus, poverty and inequality cannot be ignored in any fiscal policy formulation for elderly in India.

Few new policy measures for elderly (or senior citizens) in the Union Budget 2018-19 are generally welcome as they aim at higher after-tax income for them. The measures include a rise in TDS limit on interest income on bank and post office deposits from Rs 10,000 to Rs 50,000; increase in standard deductions for health insurance premium and medical expenses from Rs 30,000 to Rs 50,000 and medical expenditure on critical illness up to Rs 1 lakh from Rs 60,000 (up to 79 years) and Rs 80,000 (80 years and above). In addition, individual investment limit is doubled to Rs 15 lakh on Prime Minister Vaya Vandana Yojane and extended up to March 2020.

The above measures seem to be highly relevant and applicable to those who are taxpayers and relatively richer among the elderly, and pensioners from the organised public and private sectors. However, there are reasons to believe that elderly poor are ignored although they should have been targeted for budgetary benefits, especially through means-tested income security programmes for civilians and unorganised and informal workers.

Indira Gandhi National Old Age Pension Scheme (IGNOAPS): Since April 2011, this civilian old age pension scheme is applicable to those who are 60 years or above and belong to a BPL household. The pension benefit is distinguished by age: Rs 200 per individual per month in age group 60-79 years and Rs 500 per individual per month for 80 years or above.

Further, this social pension scheme has been uniformly applied to all eligible elderly men and women in rural and urban areas and unadjusted for inflation and generosity. Thus, the real pension amount (adjusted for CPI) is far below the nominal amount today and will be negligible in future.

It is painful to know that the pension amount of Rs 200 is merely equal or less than one-fifth of what is given as old age pension for building and other construction workers in many states in India including Karnataka, Punjab and Delhi. Unfortunately, the voices of elderly poor for an increase in pension amount through Pension Parishad and HelpAge India seem to have been totally neglected by budget makers this year.

Atal Pension Yojana (APY): This is a contributory pension scheme since 2015-16 and open to all workers in the unorganised sector in age group 18-40 years. The defined pension benefit ranges from Rs 1000 to Rs 5000 depending on contribution. The Union government's co-contribution was up to Rs 1000 per annum per subscriber for 5 years for those who joined the scheme between June 1, 2015 and December 31, 2015.

The scheme is limited to those who are (a) not covered by any Statutory Social Security Schemes and (b) non-income tax payers. In addition, the APY has provisions for life and accident insurance coverage. Total enrolment to APY is about 70.65 lakh persons and a coverage of 1.52% of total population or 3.17% of total unorganised workers in the age group 18-40 years at the national level. This achievement is far below the scheme's target of 200 million workers to be enrolled by December 2015.

A major reason for this failure is attributed to its contributory design because current spending priorities of workers may not include payments for future pensions. A budgetary generosity towards a full or a partial contribution would have ensured a guaranteed old age pension of Rs 1000 per month for millions of those unaffordable unorganised workers with serious impacts on livelihood and social justice.

Given the fact that direct taxes are not particularly relevant for the elderly poor, and indirect taxes are non-discriminatory by age, fiscal policy can be effective for them only through the targeted expenditure schemes like those above.

In fact, the budgetary expenditure provisions should have reflected more apparently the government's commitment to a life of dignity not only for elderly in general but the elderly poor in particular. Regrettably, this is not evident in the Union Budget 2018-19.

(The writer is former professor of Economics, Institute for Social and Economic Change)

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