It took the COVID-19 pandemic to expose the precariousness of human society across the world. As the importance of social security came into focus after the major waves of the pandemic, the debate on universal basic income (UBI) began to resurface in policy circles across the globe. However, there is another UBI that needs to be examined in the Indian context, i.e., universal basic insurance. Before discussing the second UBI, or insurance, it is worthwhile looking at the design options for social security.
Types of security nets
Income shocks result in a free fall of those living on the line of basic living wages (say line 1) down towards the critical survival line (say line 2). In any case, a fall that is further below line 2 needs to be prevented as it can be catastrophic — a household can end up facing a poverty trap. Social security systems are like a safety net placed at line 2. These social security nets can be of three types. The first is a passive safety net which catches those falling from line 1 and prevents a fall below line 2. The second is an active safety net which works like a trampoline so that those who fall on it are able to bounce back to line 1. The third is a proactive safety net which acts like a launchpad so that those who fall on it will not only bounce back but will also move up beyond line 1.
The first type of safety net is basically a social assistance programme meant for the most income-deprived sections of society. The second type of safety net is a scheme with a higher outlay. The third type of social security net is the most desirable option but requires immense resources and institutional capacity. For social security, people on the south end of the income line need social assistance schemes. Those on the north end of the income line should have voluntary insurance.
Social security mainly encompasses food security, health security and income security. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. The sheer scale of Indian social security programmes delivered to millions of households spread over a vast geography is mind-boggling.
The Indian food security programme, for example, has over 800 million beneficiaries being provided heavily subsidised food grain under the National Food Security Act (NFSA). The NFSA is the world’s largest food security programme. About 120 million children are provided free lunch under the Mid-Day Meal Scheme. In addition, some 50 million people benefit from the free meals programme run by a few State governments. Nevertheless, there are issues of financial sustainability and leakages in the food security programme.
For health and income
On the health security front, for the unorganised sector, there is the Ayushman Bharat Scheme of the central government with over 490 million beneficiaries. In the organised sector, the Central government runs the Employees State Insurance Corporation (ESIC) and Central Government Health Scheme (CGHS) catering to 130 million and four million beneficiaries, respectively. Health insurance schemes run by various State governments cover about 200 million people. Only about 110 million people in India have private health insurance. Despite these large-scale provisions, about 400 million Indians are not covered under any kind of health insurance.
Income security is the trickiest part to tackle in the social security basket. For the organised sector, there are three types of provident fund schemes: General Provident Fund (GPF) which is availed by about 20 million Central and State government employees in the country. The second is the Employees’ Provident Fund (EPF) which is availed by about 65 million workers in the other organised sector. The third is Public Provident Fund (PPF) that can be availed by any Indian citizen but has contributions from the organised sector mostly. There are about 53 million New Pension Scheme subscribers in the country (about 2.2 million in the Central government, 5.6 million in the State government and the rest in the private sector).
In the unorganised sector, the Pradhan Mantri Kisan Maan-Dhan Yojana (PM-KMY) and the PM-KISAN scheme is availed by about 120 million farmers. Atal Pension Yojana (APY) benefits 40 million people. The Pradhan Mantri Shram Yogi Maandhan Yojana has about five million beneficiaries while there are about 50,000 beneficiaries under the National Pension Scheme for Traders and Self-Employed Persons (NPS-Traders) scheme. The largest unorganised sector income security programme is the scheme under the Mahatma Gandhi National Rural Employment Guarantee Act, which has about 60 million beneficiaries. Thus, out of 500 million workers in India, about 100 million have no income security (pension, gratuity or other income) coverage. Proponents of universal basic income cite the informality of the Indian economy as the hurdle in rolling out schemes such as unemployment insurance in the country. However, besides huge fiscal implications (around 4.5% of GDP), the proposal of universal basic income runs the risk of implementation failure due to large-scale beneficiary identification requirements.
The other UBI, i.e. universal basic insurance, is a better proposition for two reasons. One, the insurance penetration (premium as a percentage of GDP) in India has been hovering around 4% for many years compared to 17%, 9% and 6% in Taiwan, Japan and China, respectively. Two, though the economy largely remains informal, data of that informal sector are now available both for businesses (through GSTIN, or Goods and Services Tax Identification Number) and for unorganised workers (through e-Shram, which is the centralised database of all unorganised workers). As a result of the recent initiatives by the Government, the Goods and Services Tax (GST) portal has 13.5 million registrations and the e-Shram portal has over 280 million registrations. As a prototype of a social security portal based on such data, the social registry portal, ‘Kutumba’, developed by Karnataka is available as a blueprint. Till the Indian economy grows to have adequate voluntary insurance, social security can be boosted through the scheme of universal basic insurance.
Rajesh Gupta is a research scholar