Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context & Demographic Challenge
- India’s rapidly ageing population poses a major pension challenge.
- Over 153 million Indians are above 60, projected to rise to 347 million by 2050.
- Despite formal sector expansion, 88% of senior citizens still work in the informal economy, lacking pensions or secure social protection.
Early Welfare-Based Approach
- Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
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- Introduced in 1995 for persons above 65 living below the poverty line (BPL).
- Subsequent modifications expanded eligibility and enhanced financial support.
- Marked India’s first significant national effort to provide regular income support to vulnerable elderly populations.
- Old Pension Scheme (OPS)
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- Covered government employees through a defined-benefit model, ensuring predictable post-retirement income.
Shift Toward Contributory Pension Framework
- Atal Pension Yojana (APY) – 2015-16
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- A contributory scheme for individuals aged 18–40 years.
- Provides guaranteed pension; government compensates if returns fall short.
- Designed for informal-sector workers, offering monthly, quarterly, and half-yearly instalment flexibility to match seasonal incomes.
- New Pension Scheme (NPS) – 2004
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- Replaced OPS for government employees with a defined-contribution model.
- Includes a corporate model covering private-sector employees.
- NPS 2.0 introduced 100% equity allocation and a multiple scheme framework, appealing to younger, high-risk investors.
- Regulatory Strengthening
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- Labour Codes Reform
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- Introduced a uniform definition of wages, ensuring basic pay constitutes at least 50% of earnings.
- Improves calculation of pension, gratuity, and social security, enhancing long-term worker protection.
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- Bridging the Formal–Informal Divide
- Pension reforms follow a tiered progression, beginning with welfare schemes (IGNOAPS, OPS) and advancing toward financial inclusion tools (APY, NPS).
- APY extends savings behaviour to informal workers, creating a unified pension vision across sectors.
Persistent Awareness Gaps
- LASI (2017–18) shows 42% of adults above 55 unaware of NPS eligibility requirements.
- Large sections of the informal workforce remain outside formal social protection.
e-SHRAM as an Integrative Framework
- Launched as a national database for informal-sector workers, enabling registration and scheme awareness.
- Challenges include Aadhaar-phone linkage issues, bank account requirements, and low digital literacy—63% of elderly lack Internet skills.
Conclusion
- India’s pension evolution reflects a shift from welfare dependency to participatory inclusion.
- While awareness and access gaps persist, initiatives like e-SHRAM signal a data-driven, inclusive approach to supporting an ageing population and enhancing dignified elderly livelihoods.