Needed, a well-crafted social security net for all – India’s Social Security System: Challenges and Possible Solutions | 24 August 2023 | UPSC Daily Editorial Analysis

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What's the article about?

  • It talks about the status of social security in India, its challenges and possible solutions.


  • GS2: Welfare Schemes for Vulnerable Sections of the population by the Centre and States and the Performance of these Schemes


  • India's social security system is composed of several schemes and programs spread throughout various laws and regulations.
  • However, the government-controlled social security system in India applies to only a small portion of the population. For example:
    • According to the Periodic Labour Force Survey Annual Report 2021-22, around 53% of the salaried workforce in India does not have any social security benefits.
    • This means that these employees have no access to a provident fund, pension, health care, or disability insurance.
    • Additionally, just 1.9% of the poorest 20% quintile of India's workforce has access to any benefits.
    • The social security system in India is also ranked poorly, with Mercer CFS ranking it at 40 out of 43 countries in 2021.
  • This article analyzes the challenges faced by India's social security system and possible solutions to provide universal social security to its entire labour workforce.

Social security in India:

  • Social security in India refers to a variety of statutory insurances and social grant schemes that are part of a comprehensive social protection system run by the Indian government at the federal and state levels.
  • The social security system in India is designed to provide support and assistance to individuals and families in times of need, such as during retirement, disability, maternity, or medical emergencies.
  • Key points about social security in India:
    • Types of Social Insurances: India's social security schemes cover various types of social insurances, including:
      • Pension
      • Health Insurance and Medical Benefit
      • Disability Benefit
      • Maternity Benefit
      • Gratuity
    • Coverage: The government-controlled social security system in India applies to only a small portion of the population, primarily those in the organized sector. This includes employees in both public and private sectors, as well as foreign investors and their employees.
    • Employees' Provident Fund Organization (EPFO): The EPFO, under the Ministry of Labour and Employment, is responsible for ensuring superannuation pension and family pension in case of death during service. It manages the Employees' Provident Fund (EPF), which is a mandatory retirement savings scheme for employees in the organized sector.
    • Code on Social Security, 2020: The Code on Social Security, 2020 is part of the Indian labour code and deals with employees' social security. It includes provisions on retirement pension and provident fund, healthcare insurance and medical benefits, sick pay and leaves, unemployment benefits, and paid parental leaves.
    • Limited Coverage: Currently, only about 35 million out of a labour force of 400 million have access to formal social security in India. This highlights the need for further expansion and improvement of the social security system to ensure broader coverage.
  • It is important to note that the social security system in India is constantly evolving, with new schemes and programs being introduced to address the changing needs of the population. The government is actively working towards expanding the coverage and effectiveness of social security in the country.


  • Current State of Social Security in India:
    • India's policymakers have largely ignored social security, with limited budgetary allocation and utilization.
    • Existing social security schemes have been left underutilized, and budgetary cuts to programs like the Mahatma Gandhi National Rural Employment Guarantee Act continue.
    • The National Social Assistance Programme, which provides monthly pensions to elderly individuals, has seen stagnated contributions from the government since 2006.
    • The CAG audit also revealed poor utilization of funds collected for social security in construction workers and the transfer of funds to deceased beneficiaries in certain states.
  • Comparison with Other Countries:
    • Brazil's General Social Security Scheme provides comprehensive coverage for various situations, including income loss due to accidents, disabilities, illness, unemployment, and even imprisonment.
    • Brazil's system is contribution-based and offers health care coverage through the Unified Health System.
    • In contrast, India's social security system lacks comprehensive coverage and faces administrative complexities.
  • Challenges Faced by India's Social Security System:
    • Lack of Access: Approximately 53% of all salaried workers in India do not have any social security benefits, meaning they have no access to a provident fund, pension, and health care and disability insurance
    • Poor Ranking: India's social security system is ranked poorly, with Mercer CFS ranking it at 40 out of 43 countries in 2021.
    • Limited Budget: Budgetary allocation for social security has always been limited, and utilization even less so.
    • Poor Utilization: Several social security schemes have been left moribund due to poor utilization, such as the National Social Assistance Programme and the National Social Security Fund.
    • Lack of Awareness: There is a lack of awareness about social security benefits among workers, and the existing social security framework for unorganized workers has become complex, with overlapping areas of authority between the State and Centre.
  • Steps for Improvement:
    • Expand Employer and Employee Contribution: Formal workers under the Employees' Provident Fund Organisation (EPFO) system should have expanded contributions from both employers and employees. Informal workers with meaningful income should also be encouraged to make partial contributions.
      Encourage Formalization of Informal Enterprises: Informal enterprises should be persuaded to formalize their operations and contribute to social security benefits for their workers.
    • Government Support for Unemployed and Low-Income Workers: The government should step in to provide social protection for unemployed individuals, those who do not earn enough, and those who have stopped looking for work.
    • Reforms and Simplification: Existing social security schemes should be strengthened, with budgetary support and expanded coverage. Administrative complexities and overlapping areas of authority should be addressed to streamline the system.
    • Awareness and Information Campaigns: Greater efforts should be made to raise awareness about social security benefits among workers. Organizations like the Self-Employed Women's Association can play a role in providing information and services related to social security rights.

Way Forward:

  • India needs to prioritize and improve its social security system to ensure that all workers have access to essential benefits.
  • This requires expanding coverage, encouraging formalization, providing government support, simplifying administrative processes, and raising awareness.
  • By implementing these steps, India can work towards providing universal social security to its entire labor force and promote equitable growth.

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