Social Security in India, Bridging the Gaps for Inclusive Growth

Social Security in India, Bridging the Gaps for Inclusive Growth

Why in News?

The social safety net in India has once again come under the spotlight as experts and policymakers discuss the pressing need for inclusive and sustainable social insurance systems. Despite several schemes being operational, a large proportion of India’s informal sector workers remain excluded from formal social security programs. This ongoing exclusion exacerbates income inequality, worsens poverty, and increases vulnerability to economic shocks. Recent discussions highlight the need to strengthen these systems for a more resilient and inclusive welfare structure.

Introduction

Social security is a cornerstone of any progressive society. It is not just a tool for economic assistance but also a vital aspect of ensuring human dignity, social justice, and inclusive development. In India, the idea of social security has evolved significantly over time, moving away from a laissez-faire governance model to a system that seeks to provide structured welfare to its citizens.

Despite these developments, the Indian social security system faces several limitations, especially when it comes to coverage and efficiency. While numerous schemes exist for the organized sector, the informal sector—comprising a substantial part of India’s workforce—continues to remain marginalized and vulnerable.

The Foundation of Social Security in India

Historically, social insurance systems began as a response to industrialization, focusing on contingencies such as illness, old age, disability, and unemployment. Initially, the role of the state was minimal, primarily maintaining law and order. However, modern states began to prioritize social welfare, introducing various programs to safeguard citizens against life’s uncertainties.

In India, the notion of social security includes protection against sickness, disability, maternity, unemployment, and old age. Social insurance thus refers to state-backed mechanisms that provide economic support and access to healthcare in times of need. This framework has evolved significantly but still falls short in several key areas.

Current Social Security Schemes in India

Some of the most prominent social security initiatives include:

• Pradhan Mantri Jan Arogya Yojana (PM-JAY or Ayushman Bharat): Offers subsidized health insurance to economically vulnerable populations.

• National Social Assistance Programme (NSAP): Provides pensions and financial assistance to elderly individuals, widows, and disabled persons living below the poverty line.

• Atal Pension Yojana (APY): Aimed at providing pension benefits to workers in the unorganized sector.

• Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM): A voluntary pension scheme for informal workers aged 18–40.

These schemes have brought millions under the social security net, but their implementation and effectiveness vary.

Key Issues and Institutional Concerns

1. Limited Coverage of Informal Workers

Most social security schemes, like the Employees’ State Insurance Act and the Employees Provident Funds Act, cater exclusively to workers in the formal sector. This leaves the majority of India’s workforce—employed in informal or unorganized sectors—outside the purview of critical benefits.

This exclusion increases vulnerability during illness, old age, or employment disruptions. It also reinforces existing economic inequalities, undermining the goal of inclusive development.

2. Low Awareness and Literacy

Another significant barrier is the lack of awareness about available schemes. In rural areas and among underprivileged populations, people often do not know what they are eligible for. This low uptake of benefits further marginalizes already vulnerable groups.

3. Complexity in Access

The procedures for enrollment and benefit access are often overly complicated. Required documentation, digital literacy, and authentication issues prevent low-income individuals from accessing social insurance efficiently.

4. Affordability Concerns

Many insurance schemes have premium costs that are unaffordable for people with low and unstable incomes. Out-of-pocket expenses for healthcare and insurance often push families deeper into poverty.

5. Administrative Inefficiencies

Delays in claim settlements, poor service delivery, lack of funding, and ineffective identification mechanisms often plague social security schemes. These inefficiencies reduce trust in government programs and lower overall participation.

6. Digital Divide and Technological Exclusion

As many schemes shift to digital platforms, people without access to smartphones, the internet, or digital literacy are often left behind. This digital gap is especially pronounced in rural India.

Challenges and the Way Forward

To build a robust and inclusive social security framework, India must:

1. Bridge Coverage Gaps

Extend the coverage of social security schemes to include informal and gig economy workers. Simplify the enrollment process and reduce eligibility barriers.

2. Increase Public Awareness

Launch information campaigns to educate citizens about the benefits, procedures, and eligibility for various social insurance programs.

3. Administrative Streamlining

Improve backend processes, reduce claim delays, and deploy technology to increase efficiency. Use tools like Aadhaar and mobile platforms for beneficiary identification and direct benefit transfers.

4. Enhance Budget Allocation

Allocate more funds for healthcare, pensions, and unemployment support to meet the rising demand for social protection.

5. Policy Reforms

Introduce structural reforms to harmonize and consolidate overlapping schemes. Use an integrated architecture that can serve all citizens effectively.

Conclusion

India’s social security net has seen considerable expansion over the years, but it still falls short of delivering universal protection, particularly for those in the informal sector. For a country with over 90% of its workforce employed informally, this gap in protection is both a social and economic crisis.

While schemes like PM-JAY and NSAP offer hope, the sustainability and reach of these programs depend on political will, public awareness, effective governance, and adequate funding. To secure a future where every citizen can live with dignity, India must address these gaps and strive for a more inclusive and equitable welfare system.

Q&A Section

1. Why are most informal sector workers excluded from India’s social security system?

Most Indian social security schemes are designed for the organized sector, requiring formal employment, regular documentation, and employer contributions. Informal workers often lack official employment contracts and awareness of these programs, leading to their exclusion.

2. What are some flagship social security schemes currently active in India?

Key schemes include:

• PM-JAY (Ayushman Bharat): Provides free health insurance.

• NSAP: Offers pensions to the elderly, widows, and disabled.

• APY: Ensures old-age pensions for unorganized workers.

• PM-SYM: Provides voluntary pension plans for informal sector workers aged 18–40.

3. What are the major challenges faced by these social security schemes?

Some major challenges are:

• Inadequate budget allocation.

• Poor service delivery and administrative inefficiencies.

• Low awareness and digital exclusion.

• Complicated enrollment processes.

• Inaccessibility due to premium costs.

4. What steps can improve the effectiveness of India’s social security system?

• Expand coverage to informal workers.

• Simplify enrollment and access procedures.

• Increase public awareness campaigns.

• Strengthen digital infrastructure for efficient delivery.

• Integrate various schemes into a unified, accessible platform.

5. How does strengthening social security contribute to India’s development?

A strong social security framework reduces poverty, enhances productivity, and provides a safety net during health or economic crises. It also encourages labor participation, boosts consumption, and promotes equitable economic growth.