Universal pensions from government?

India's 860 million-strong working population (15-64 years), the world's largest, is beginning to age. Over the next 33 years, by 2050, 32.4 million Indians, or 20 per cent of the population, will be above 60 years of age. If pension continues to cover only 35 per cent of senior citizens as it does today, 20 million, or 61.7 per cent of India's elderly population, will be without any income security by 2050.

The Centre pays Rs 200 per month under the Indira Gandhi National Old Age Pension Scheme (IGNOAPS) to every Indian over the age of 60 and living under the poverty line (the ability to spend Rs 33 per day in urban and Rs 27 per day in rural areas as per the Tendulkar committee on poverty line). The states are encouraged to add to this sum and are free to expand the coverage. Currently, states pay anything between Rs 200 and Rs 2,000 as public pensions.

Should public pensions be universal or targeted? What should be the minimum offered by a public, non-contributory pension? From which age should it be granted? To find answers to these questions through opinions of older people, a study was conducted in Gujarat and Rajasthan by the Centre for Equity Studies (CES), New Delhi in August-November 2016.

The study, yet to be published, collected opinions and experiences of 1,505 people above the age of 55 years across 14 locations in Gujarat and Rajasthan. The states were chosen because they represent two ends of the spectrum in the universalisation debate: Gujarat, India's 10th richest state in per capita gross domestic product (GDP) ranking, offers a targeted pension of Rs 400 only to the poor at the time the study was conducted (since then the amount has been revised to Rs 500), and Rajasthan, 23rd in the per capita GDP list, extends Rs 500 to (nearly) all senior citizens.

The study found a wide and conclusive gap between pension policy and public opinion. Opinion across both states was unanimous that public pension should be extended to all elderly and should be initiated earlier than at age 60 years. The popular view was that Rs 2,000 was an adequate pension sum, which is four to six times higher than their present entitlement.

Gujarat pursues a narrowly targeted scheme whereby only the poorest senior citizens are entitled to public pensions. Rajasthan has near-universalised pension entitlements whereby women above the age of 55 years and men above the age of 58 years receive pensions as long as they are not entitled to pensions from any other source or are not taxpayers.

Arguments against universalisation suggest that the cost of universalisation is generally lowering the entitlement for those who need it the most. Targeting allows for public funds to be utilised for those who need them the most. On the other end of the spectrum are arguments which propose that universalisation strengthens the moral-politico claim and the delivery of the public good or service in question–in this case, pensions.

The results of the survey showed that public opinion is functioning independent of the policy on the issue of universalisation. Majority (83 per cent) of respondents from Gujarat, a state which has experienced a targeted public pension scheme, were in agreement with those from Rajasthan (81 per cent) who have experienced a near-universal pension scheme for about five years. The public opinion is unequivocally skewed in support of universalisation.

Older people living with families supported universalisation of pensions as much as those living alone. This is an important finding because till about 2007, the National Old Age Pension Scheme, as it was then called, considered destitution both a reason and a condition for being entitled to non-contributory, public pensions. In Gujarat, destitution continues to be used as a criterion–senior citizens who have sons above the age of 21 years are not considered eligible for public pensions.

Support for universalisation was observed in similar proportion across gender. The support was also consistent across scheduled tribes, other backward classes and other castes.

Pensions are an assurance of continuation of consumption levels required for dignified living in the face of reduction in income due to physiological atrophy and comparatively restricted income-generating opportunities.

Beneficiaries above the age of 75 years were entitled to Rs 750 a month. These pensions did not allow elderly Indians working in the unorganised sector, who need public pensions the most to retire. These entitlements don't support lowest official poverty line consumption levels of Rs 27 in rural and Rs 33 in urban per day as per the Tendulkar Committee.

People across Rajasthan and Gujarat voiced concerns about the amount of entitlement. Less than 3 per cent in Rajasthan and 13 per cent in Gujarat stated a figure equivalent to or less than Rs 750 a month–at present the highest amount entitled under IGNOAPS to those above the age of 75 years–was sufficient. Less than one-third mentioned a figure less than Rs 1,000 per month.

How much did people think it took to ensure a dignified living? The average monthly 'sufficient' pension amount in Rajasthan was Rs 1,875 whereas in Gujarat it was Rs 2,494, the study found. This amount is equivalent to half the minimum wage presently assured. The civil society group Pension Parishad has been making similar demands regarding amount of entitlement.

Bolivia, a country with a sizably smaller economy but comparable to India on other economic indicators, offers about $38 per month, a little over Rs 2,400, as part of its pension programme, Renta Dignidad. Most countries with decent pension programmes such as Bolivia's ensure an entitlement amount equivalent to anywhere between 15 to 25 per cent of per capita GDP.

Family/social support and the amount of pension desired by a beneficiary share a counter-intuitive relationship. Elderly respondents singly taking care of themselves consistently quoted a smaller amount than the ones being taken care of by family. This fits in with field observations–many older citizens expressed a desire to buy petty essentials such as notebooks or a fruit for a grandchild or to pay for the medical expenses of an ailing family member. They thought of their inability to pay for these small expenses as a personal failing.

Many factors such as average life expectancy, age structure of the society and physical atrophy should inform the age at which pensions are initiated. The IGNOAPS initiates pensions at the age of 60 like many industrially advanced nations. But the average life expectancy in India–68 years–is much lower than industrially advanced nations. We asked people during our research whether they thought pensions should be initiated at an age earlier or later than the one stipulated by the policy at present. The majority of people felt that pensions should be initiated at an earlier age.