Presenting the interim budget for 2019-20 on February 1, 2019, the then acting finance minister, Piyush Goyal had announced the decision of the government to launch PM Shram Yogi Mandhan [PMSYM] with an intent to provide economic security cover to persons working in the ‘unorganized’ sector in old age.
Under PMSYM, a person in the ‘unorganized’ sector and earning less than Rs 15,000/- per month gets pension @Rs 3000/- per month on completion of 60 years age. For this, a worker joining at the age of 29 years contributes @Rs 100/- per month with matching contribution by the centre. A person joining at the age of 18 years contributes @Rs 55/- per month with equal amount by the centre. This scheme is expected to benefit over 100 million workers.
Taking its social security agenda forward, in the very first meeting of the Cabinet under Modi 2.0 [May 31, 2019], the government has decided to give pension to retail traders, shopkeepers and self-employed @ Rs 3000/- per month on attaining 60 years age. The person has to contribute specified amount per month [depending on the age of joining] with matching contribution by the centre.
All persons with GST [Goods and Services Tax] turnover less than Rs 15 million and aged between 18-40 years can enroll themselves for the scheme [ enrolment can be done through over 325,000 common service centres (CSCs) spread across the country]. The scheme is expected to benefit over 50 million traders.
For the farmers, besides extending PM – KISAN [announced in the interim budget for 2019-20, under it, the centre gives cash support of Rs 6000/- to all small and marginal farmers] to cover all farmers, the Cabinet also approved a pension scheme assuring them a minimum of Rs 3,000 per month on attaining 60 years. The scheme will benefit over 50 million farmers.
Under all the aforementioned pension schemes, in the event of subscriber’s/beneficiary death, his/her spouse will be entitled to receive 50% of the pension amount, provided he/she is not already a beneficiary of the scheme.
Unlike persons working in the organized sector wherein there exist well crafted institutional mechanisms such as provident fund, gratuity, pension [also involving significant contribution by the employer on behalf of the employee] to take care of the old age needs including a regular income stream, those working in the un-organized sector have no such mechanisms to fall back for support.
It is not just workers in the un-organized sector but also small traders, shopkeepers, self-employed persons as also millions of farmers who are potentially vulnerable. All through their prime time/working age profile [18 – 60 years], apart from being low, the income is also subject to wide fluctuations thus impairing their ability to generate sufficient savings needed to plan for their old age.
It is this void which Modi [who having come from a poor background fully comprehends the pain and tribulations that these vulnerable groups go through particularly during their old age] is filling by implementing pension schemes. This is in addition to a host of welfare measures to supplement their current income as under PM-KISAN or giving them insurance cover as under PM Suraksha Bima Yojna [PMSBY] assuring Rs 200,000/- in case of an accident for a token premium Rs 1 per month or PM Fasal Bima Yojna [PMFBY] giving cover for crop loss for a mere 1.5%/2% or free treatment for up to Rs 500,000/- for serious ailments under AYUSHMAN Bharat.
Critics often argue that the promised pension amount is too small. This is a fallacious argument. For a person who has nothing to fall back on during the most difficult period of his/her life time, even Rs 3000/- a month will give him/her adequate financial security. It will give elderly persons an opportunity to lead a life with honor and dignity especially when seen in the backdrop of un-obliging kith and kin refusing to provide the much needed support. Besides, with slight tweaking of the scheme [say, by increasing contribution], it should be possible to raise the pension amount as well.
The pension schemes won’t entail major resource burden on the government/exchequer [and eventually the tax payer]. To get a sense, let us look at some numbers. To arrange pension for retail traders, the beneficiary contributes on an average say Rs 100/- per month or Rs 1200/- per annum [this is too small an amount and far from destabilizing his/her regular budget]. The matching contribution by the centre for 50 million traders will be Rs 6000 crore annually. That is a mere 0.3% of centre’s tax revenue of Rs 1800,000 crore and 0.2% of the annual budget over Rs 2400,000 crore.
At the same time, these investments [by the subscriber and the government] will help in building a corpus good enough to honor the commitment made under the pension scheme.
The contribution of Rs 12,000 crore every year – including Rs 6000 crore each from beneficiaries and the centre – over 30 years [the average time frame from the date of joining the scheme] will build a corpus of about Rs 1360,000 crore [compounding @8% per annum]. This translates to Rs 272,000/- per subscriber/trader which should be adequate to pay for monthly pension of Rs 3000/- [average life expectancy of about 70 years]. The implications for giving pension to other sections of the society viz. workers in un-organized sector, farmers etc will be broadly similar.
So, the issue is not one of resource availability. It has more to do with how much the leadership cares for the people at large and willingness of the ruling establishment to come up with innovative ideas to redress their problems. The pension schemes unveiled by the Modi – government amply prove this.