Macroeconomic growth, challenging realities

Himanshu Jha, Santosh K Patra
National Social Watch Coalition

In this phase of impressive macroeconomic growth, there is a clear need for renewed political and policy emphasis on reinforcing existing social security schemes, as well as developing new initiatives to keep up with the ever evolving socioeconomic and demographic realities of the country, such as its ageing population. While proposed legislation to protect the informal sector is a positive step, much more is needed to ensure an effective safety net for the vulnerable and marginalized.

The Indian state is now moving towards agrowth-oriented neoliberal policy, where GDP growth, privatization andindustrial expansion have become buzzwords for the future. Yet there areconsiderable sections of society who are in need of some kind of safety net torealize their economic, social and cultural rights. In this phase of 9%-plusannual economic growth, it has become inevitable to move towards the realizationof social security for all.

The nature of socioeconomic and demographic realities is such that it makes aneffective social security system a necessity. The percentage of the populationliving below the poverty line is still around 27.8%. People aged 60 and over nowmake up 7% of the total population and projections indicate that the populationin this age group will grow to 100 million by 2013. Workers in the unorganizedor informal sector number over 370 million and represent 93% of the totalworkforce. The unemployment rate in the country increased from 6.1% in 1993-1994to 7.3% in 1999-2000, and then rose even further to 8.3% in 2004-2005. Thecountry’s current economic growth has clearly not generated employment, andemployment levels have declined even in the organized (formal) sector(Government of India, 2006).

Agriculture is an important sector supporting close to 115 million familiesacross the country and providing employment to around 58.2% of all workers. Itis therefore a matter of particular concern that there has also been a sharpincrease in unemployment among agricultural labour households – from 9.5% in1993-1994 to 15.3% in 2004-2005 – which are already among the country’spoorest households (Government of India, 2006).

The urgent need for an effective social security system is increased by therapid and widespread changes at the present juncture. Indian society isundergoing transitions on several fronts where the traditional social securitysystem has almost completely broken down, leaving the old, the destitute andother vulnerable sectors to fend for themselves. On the other hand, the retreatof the state under the impact of the neoliberal framework and the forces ofglobalization has created a policy dilemma in which the concerns of the welfarestate have been left behind. In spite of constitutional stipulations regardingthe provision of social security, the current system leaves wide gaps,especially in terms of covering vulnerable sectors of the population like theelderly, women, children, and the millions of paid and unpaid workers employedin the unorganized sector. So far, there has been an absence of a comprehensiveand realistic social security net provided by the state. Existing initiativesare ridden by ineffective and insufficient implementation and lack a long-termperspective. The state cannot shy away from its commitments under theconstitutional stipulations. The multidimensional nature of the issue of socialsecurity makes it not only more complex but also more urgently in need ofimmediate action.

Social security for the informal sector:initiatives and challenges

While there is somewhat of a social security framework in place for theorganized sector, there has been a serious gap in the social security policy forthe unorganized sector. Out of 399 million workers in 1999-2000, it is estimatedthat 371.2 million (nearly 93% of the entire work force) were employed in theunorganized sector, as compared to only 27.8 million (7%) in the organizedsector (
Sakthivel and Joddar, 2006).

In line with the commitment made in its National Common Minimum Programme, theUnited Progressive Alliance government recently finalized the drafting of asocial security bill for workers in the unorganized sector. As a complement toexisting social security provisions at the national and state level, the billoffers such social protection measures as health insurance, maternity benefitsand old age benefits to workers in the informal sector, while also addressingthe conservation of natural resources on which workers depend for theirlivelihood. The uniqueness of the bill is that it is founded on a rights-basedframework and is legally enforceable. The proposed scheme would be voluntary andcontributory in nature, with contributions from both workers and government.

A closer look at the draft bill, however, reveals some glaring gaps. First ofall, the bill is not in consonance with the principles of non-discrimination andequity upheld by our constitution and the international covenants ratified byIndia, such as the International Covenant on Economic, Social and CulturalRights. The bill will cause further fragmentation by excluding people alreadycovered in the existing schemes, and takes a segmented approach to providingsocial security by making a distinction between the organized and unorganizedsectors instead of consolidating the two (
Duggal, 2006). Questions can also be raised about the verydefinition of ‘unorganized’. According to the National Commission forEnterprises in the Unorganized Sector, these are unincorporated enterprisesowned by the individuals or households, which employ less than ten people.However, there are workers in the formal sector as well who may fall under thecategory of ‘unorganized’ because they do not have the rights and privilegesthat those working in the organized sector are supposed to enjoy (Chandrasekhar andGhosh, 2006).

The bill has also adopted a ‘blanket’ approach towards the unorganizedsector, failing to take into account its heterogeneity. As observers havepointed out, the specific minimum social security package needed by each of thesub-sectors is likely to be different, due to different priorities (
Hirway, 2006).

Furthermore, while the provision of minimum social security coverage to theunorganized sector is a welcome initiative, the amount of money that isultimately going to be received by the beneficiaries under different schemes andcategories is clearly insufficient. For example, the proposed old age pensionfor workers below the poverty line after the age of 60 would be INR 200 a month(scarcely USD 5), while accidental death would be compensated with a lump-sumpayment to survivors of INR 25,000 (USD 615). This raises questions about theintentions and the will of the policy makers, and leads one to wonder if this isperhaps yet another example of tokenism.

The elaborate institutional structure suggested by the bill depends upon theusual hierarchically graded system reaching from the central government to thedistrict level, with the involvement of grassroots organizations like the panchayats(local government bodies), self-help groups and trade unions. However, thiselaborate set-up has proven ineffective in many other previous schemes, and thefact that grassroots institutions are already loaded with many other functionscasts serious doubts about their ability to effectively carry out this newinitiative.

The tendency to overload the existing machinery and procedures is alsoillustrated by the fact that the notoriously inadequate ‘below poverty line’criterion is proposed to be used for identifying the beneficiary households (
Hirway, 2006).

In response to the social security bill, trade union federations have emphasizedthe need to improve the legislative proposals with more specific and concreteprovisions on such issues as protection against job loss, appropriatecompensation, working hours, labour inspection and dispute/grievance settlementmachinery, and punishment for violations of labour standards (
Central TradeUnions, 2006).

Increased need for protection of the elderly

The increasing life expectancy and growing share of the population aged 60 andover necessitate comprehensive social security coverage for older adults, whomade up close to 7% of the population in 2001 and are predicted to account foralmost 9% in 2016 (Government of India, n.d.). Estimates place the number ofpeople aged 60 and over at 100 million by 2013 and 198 million in 2030.

Aside from the large size of the elderly population in the future, there areother factors that raise concern. Around 80% of the elderly live in rural areas,posing challenges with regard to an effective delivery mechanism for assistance.In addition, the feminization of this problem is highlighted by the predictionthat women will make up 51% of the elderly population by 2016. Finally, the veryelderly population – those aged 80 and over – is also increasing, and about30% of this population lives below the poverty line (
EPW, 2007).

In general terms, even the wage-earning population tends to move below thepoverty line in old age because of insufficient savings and other contingencies.There are currently few social security provisions for the aged, and theexisting provident fund and pension schemes apply only to the organized sector,leaving the vast unorganized sector uncovered. Other schemes providing somedegree of protection to senior citizens are available in the form of marginallyhigher interest rates on small savings, but much of the effort to save for thefuture has been thwarted by the recent decision to tax accumulated savings(Gopal, 2006).

The Directive Principles of State Policy stipulate that “the state shall,within the limits of its economic capacity and development, make effectiveprovision for securing the rights of public assistance in cases of old age.”In this regard, the National Policy for Older Persons, announced in January1999, could perhaps be viewed as a milestone. However, a recent study conductedby HelpAge India concludes that progress on its implementation has been tardy (
EPW, 2007).

In February 2006, the Cabinet approved the Maintenance and Welfare of Parentsand Senior Citizens Bill. The bill mentions a number of government initiatives,including the maintenance of a database on the elderly, the provision of an oldage pension of INR 1,000 (USD 24,6) per month, and the establishment of anadequate number of old age homes, especially for those with no family support (
EPW, 2007). The bill also outlines the setting up oftribunals through which the government would take action against individuals whodo not take proper care of their elderly parents, resulting in imprisonment andfines of up to INR 5,000 (USD 123). This kind of legislation was long overdue,but what is needed now is its quick and effective implementation.

Women deprived as beneficiaries

Unpaid workers have been excluded from the proposed social security schemes forthe unorganized sector, which has grave gender implications, since women tend tobe considerably overrepresented among unpaid family workers (
Neetha, 2006). Excluding unpaid workers as beneficiariesof these schemes will directly affect these women workers who already face thetwin deprivations of being poor as well as being women.

Such a gender bias can also be seen in the National Policy for Older Persons. AsGopal (2006) notes, although it recognizes the higher life expectancy of women,“
there is not much emphasis to highlight the gender implications of such apolicy despite evidence that women in this category suffer greatervulnerability. In the sections onhealthcare, nutrition, shelter and education, there is no specific reference towomen’s situation.”

Schemes such as the Integrated Rural Development Programme, Integrated ChildDevelopment Services, Development of Women and Children in Rural Areas and othersocioeconomic programmes have been operating since the 1980s, but so far havenot been able to achieve the desired results. “Even though the state targetsthe family for provision of social security, as far as women are concerned, whentheir tie to the breadwinner is broken in case of divorce, desertion, separationor widowhood, it means destitution” (Gopal, 2006).

Rural employment scheme shows mixed results

The National Rural Employment Guarantee Programme (NREGP)[1]is perhaps one of the most extensive schemes in recent years to provideemployment in rural areas during the lean season. It covers 200 districts acrossthe country, with the objective of providing 100 days of guaranteed unskilledwage employment to each rural household opting for it. The NREGP is ademand-driven scheme, focusing on works related to water conservation, droughtproofing, land development, flood control, drainage and rural connectivity. Onemajor limitation of this programme, however, is the complete disconnect betweenrural infrastructure plans and the NREGP-related creation of infrastructure.

The implementation of the programme so far has shown mixed results. Theregistration percentage among eligible households ranges from 14.1% to 100% insome districts. The awareness level among the beneficiaries about the programmeis also very low. Much needs to be fine-tuned in the implementation andutilization of the programme, in order to address such problems as the generalawareness level, the timely and prescribed payment of wages, and the role oflocal self-government bodies (gram sabhasand panchayats) through which theprogramme is supposed to be implemented at the grassroots.

Essentially, the NREGP is more of an income support programme intended to helppeople face the current drought of work, and is not an instrument of generatingemployment in the medium to long run.


Central Trade Unions (2006). Response to the Social Security Bill for theUnorganized Sector, 6 June.

Chandrasekhar, C.P. and Ghosh, J. (2006). “Providing Social Security toUnorganized workers”. The Hindu, 27June.

Duggal, R. (2006). “Need to Universalize Social Security”, Economic and Political Weekly, 12 August.

EPW (Economic and Political Weekly) (2007). “Senior Citizens: Legislating OldAge Security”. Editorial, 10-16 March.

Gopal, M. (2006). “Gender, Ageing and Social Security”. Economic and Political Weekly, 21 October.

Government of India (n.d.). Population and Human & Social Development”. National Commission on Population. Available from: <>.

Government of India (2006). “Towards Faster and More Inclusive Growth: AnApproach to the 11th Fiver Year Plan”. Planning Commission,December. Available from:<>.

Hirway, I. (2006), “UnorganizedSector Workers’ Social Security Bill, 2005; Let Us Not Go Backwards!”. Economic and Political Weekly, 4 February.

Neetha, N. (2006). “‘Invisibility’ continues? Social Security and UnpaidWomen Workers”. Economic and PoliticalWeekly, 12 August.

Sakthivel, S. and Joddar, P. (2006). “Unorganized Sector Workforce in India:Trends, Patterns and Social Security Coverage”. Economic and Political Weekly, 27 May.

Social Watch India (2007). Social WatchIndia Report 2007 - Deepening Disparities and Divides: Whose Growth is it Anyway.New Delhi: Sage.


[1] For furtherdiscussion see Social Watch India Report 2007.