https://orcid.org/0000-0002-0098-8050
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Abstract
About 91% of India’s workforce of 520 million is informal, lacking social insurance. However, this paper finds the Social Security Code 2020 wanting, but with potential for universalizing social insurance. The paper spells out the principles that should guide social insurance for informal workers; and presents the design and architecture for extending coverage. It shows how realistically, over the next 10–15 years, social insurance could cover the entire workforce, in accordance with ILO Conventions. It also estimates the fiscal cost of social insurance, for the first five years, and spells out the political economy, fiscal and administrative challenges to universalisation.
Competing interests
The authors report there are no competing interests to declare.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 No Consumption Expenditure Survey was conducted between 2012 and 2017–18. The 2017–18 survey was cancelled by the government, and new ones are underway at the time of writing (in 2022–23 and 2023–24). A debate has raged over the last few years on the extent of poverty. The 22% head count ratio remains the only official estimate for poverty. For our purposes, we have rounded off the estimate to 20% for this paper, as our own estimates of poverty suggest that there has been only a marginal decline in the poor as defined by the (Tendulkar) national poverty line, and given the lower GDP growth rate, poorer job creation, and stagnant or falling wages, the absolute number of poor has not fallen (Mehrotra and Parida Citation2021).
2 The labour force survey questionnaire allows us to even find out what proportion of the workforce has a written contract or gets paid leave, but for our purposes we ignore those estimate.
3 The author believes that Chopra and Puduserry (Citation2014) present a very balanced assessment of these pensions, since would see the effects of these pensions at the ground level as the head of Rural Development, Planning Commission of India soon after they were extended to poor widows and disabled, in addition to the elderly as a response to the global economic crisis (2008–09) on the poor.
4 These are counted among the formal workforce of about 10% of the total workforce.
5 These are governed by The Building and Other Constructions Workers (Regulation of Employment and Conditions of Service) Act, 1996; and Beedi Workers Welfare Cess Act 1976, pursuant to which Acts were also framed by Parliament to.
6 Unorganised sector coverage through commercial schemes is only 1.2 per cent for personal accident insurance, 0.5 per cent for private health insurance, and 23 per cent for life insurance (O’Keefe Citation2006). These numbers have changed significantly for health insurance, as we have noted. They have also been increasing for life insurance as well, as private insurers have entered the market since 2005, and public sector insurers have also expanded operations.
7 There is, however, a lump sum maternity benefit for mothers categorized as ‘poor’, who are given Rs 5000 (plus Rs 1000 for institutional delivery) which is outside this Code. The SS Code 2020 does not mention this non-contributory maternity benefit for poor pregnant mothers.
8 Regular workers could exist in both the formal and informal sectors, although the majority of formal sector workers do have access to social insurance.
9 The GST, launched on 1 July 2017, nationally, subsumes 17 different indirect taxes on goods and services, earlier levied by the federal and state governments, the most important of these being the state government determined VAT, which varied by state.
10 Even after using the national poverty line as a marker for determining the ratio of the workforce that is covered by a non-contributory mechanism of SI, the identification of groups and households below this poverty line will still remain. This issue is discussed in Section “Social Security for Informal Workers: The Coverage and Architecture”.
11 Mehrotra and Parida (forthcoming) estimate that between 2012 and 2020, the incidence of poverty hardly fell to 21%, but the absolute number of poor increased by 15 million to 285 million
12 Even if some of these units are seasonal, the point is that they will come up again the following year; and even if units have a high death rate, that too is data worthy of capture for purposes of policy related to designing policy to support micro units.
13 The World Bank (Citation2019) estimates that 56 million fell below the poverty line of $2.15 per person per day which is similar to the national (Tendulkar) poverty line, thanks to the economic manifestations of lockdowns during Covid, despite protective action by governments in India.
14 The2019–20 average exchange rate was Rs75=$1.
15 Gross National Income data from Ministry of Finance (Citation2022).
16 Mehrotra (Citation2020) discusses (for the ILO) at length measures adopted in Asian countries to encourage formalization, and does a meta-analysis of these measures.
17 Only 12 per cent of firms are such contractors, linked through production networks (Mehrotra and Giri Citation2023).
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Santosh Mehrotra
Santosh Mehrotra, Visiting Prof, Centre for Development, Bath University, UK, was Professor of Econ, Centre for Labour, Jawaharlal Nehru University; also a Research Fellow, IZA Institute of Labour Economics, Bonn. He is also a Professorial Senior Fellow, Nehru Memorial Museum & Library. MA (Econ), New School for Social Research, New York; Phd (Econ) Cambridge University. Was head of UNICEF’s global research programme at Innocenti Research Centre, Florence, and chief economist, global Human Development Report New York (1991–2006). Head, Development Policy Division of India’s Planning Commission. Then Director General of National Institute of Labour Economics Research (2006–14). He has published 13 books (including 3 with Cambridge University Press, 4 with Oxford University Press, other by Sage, Routledge, Zed Press, Penguin). His work has been translated into Hindi, Spanish, French, Russian, German and Portuguese.