When the one nationwide pension scheme for the elderly covers only a third of those eligible and is itself starved of funds, there is little sense in getting excited about Jan Dhan, Aadhaar-linked payments and mobile money
The government has announced primarily three fixes for delivering welfare programmes better: Jan Dhan, Aadhaar and Mobile Money (the ‘JAM’ trinity), the Socio Economic and Caste Census (SECC) and increased fund devolution to states via the 14th Finance Commission Report.
The JAM trinity seeks to combine financial access through bank accounts, Aadhaar for unique identification and mobile technology to deliver direct benefits to citizens through cash transfers. The Socio Economic and Caste Census (SECC) database offers an opportunity to correctly identify beneficiaries and target public services more effectively. And the 14th Finance Commission recommends the pruning of centrally sponsored schemes to give states greater fiscal and administrative space to implement social sector schemes.
The implications of these reforms and their scope for success is perhaps best tested in the case of pensions for the elderly poor. We choose to focus on old age pensions as part of the National Social Assistance Programme (NSAP) as this represents a most basic commitment of the state to provide social assistance to its most vulnerable citizens – in this case, defined as a monetary pension of Rs. 200 per month to persons above the age of 60 who are below the poverty line.
Will JAM help put bread on the table?
The JAM architecture seeks to deliver price subsidies as cash transfers directly into bank accounts of beneficiaries. Its stated aim is to make them leakage-proof and well-targeted. What we have with NSAP is an existing architecture of a cash transfer to a defined target group.
As far as leakages in the NSAP are concerned, several recent studies show that they are minimal. The 10-state PEEP survey in 2013 suggests that there is strong evidence to support the fact that the money is reaching the intended beneficiaries without any major leakages. Among the nearly 900 respondents selected at random from the official pension lists, 97 per cent were getting their pension. The low levels of leakage are echoed in a study in Karnataka and Rajasthan based on national household survey data.
Instead, these studies suggest the most pressing issue is the correct identification of the poor and the exclusion of eligible beneficiaries, which brings us to the second goal of JAM. While JAM can authenticate the identity of the person collecting his or her payment, it has no role to play in determining eligibility. This is what the Chief Economic Advisor, Arvind Subramanian has also referred to as the ‘first mile problem’.
To illustrate further, the 8-state study by Tata Institute of Social Science (TISS) and Pension Parishad in 2014 finds that even as Below Poverty Line (BPL) is the most widely used eligibility criteria, being poor does not translate into a BPL card and having a BPL card does not ensure a pension. It cites the case of Gujarat where, in the sample for the financial year 2014-15, only 30% of those eligible were receiving a pension.
Instead, the study recommends simplicity in application procedures and citizen friendly facilitation mechanisms at the block level to ensure that all eligible persons are covered under the program. Through qualitative interviews with implementing agencies, the TISS study also suggests that erratic pension payments are linked to the erratic fund release system from the state and Centre. This is perhaps the corollary to the ‘first mile’ which can only be ironed out by regular and timely releases of funds from the Centre.
With respect to the third part of JAM – ‘Mobile Money’ – which has not yet been detailed, the study finds that states have innovated with payment systems best suited to their context. These include money order doorstep delivery in Rajasthan, cash via gram panchayats in Haryana and community service providers in Andhra Pradesh. Interestingly, the cash payment system in Haryana seemed to be working the best with pensioners expressing the highest levels of satisfaction with the convenience and transparency of the mode. Findings from a recent World Bank study [PDF] (February, 2015), collecting household level data from three states says that beneficiaries prefer the existing mode of payment in place.
Thus the NSAP has in place an existing architecture for the delivery of cash transfers via a fairly low leakage, flexible system. The evidence from these studies instead points to the need to focus on the correct identification of the poor and exclusion of eligible beneficiaries.
Can SECC help correctly identify beneficiaries?
At 8% of the population, the elderly in India are a 100 million strong force. Their strength as a percentage of the population has steadily increased over the decades from 6.8% in 1991 to 7.4% in 2001; by 2021, the elderly are projected to be around 12% of the population. This growth in the elderly population outpaces the growth of overall population in the same time periods. There are also trends of feminisation and ruralisation in ageing of the Indian population.
The trends of ageing based on NSSO data – as put forward by the Situation Analysis of the Elderly in India by the Ministry of Statistics and Programme Implementation – show that not only is the old age dependency ratio increasing (i.e. the ratio of the 60+ to 15-59 population) but 39% of the aged are still working as part of the work force.
To quantify the limited coverage of NSAP consider the following statistic: in the previous financial year, NSAP benefits went to 2.3 crore individuals while the elderly in India constitute about 10 crore people, making the coverage only about 25%. This is where the SECC could have far reaching consequences by presenting an opportunity to move beyond a targeting regime towards near universal coverage with clear exclusion criteria. This will meet the needs of India’s changing demographic. Within the framework of universalisation, it offers the opportunity to ensure that no deprived categories of persons are excluded. For example, the SECC provides specific figures on women headed households, households with a disabled person, destitute persons living on alms etc.
The TISS study found that multiple methods for identification of potential beneficiaries are being followed by states from ‘khuladarbars’ in Haryana, ‘pension adalats’ in Kerala or ‘pension shivirs’ in Rajasthan. While these have a significant one time impact, they are neither systematic nor institutionalised.
The SECC data was released in July but there is as yet no roadmap on how it will be used for the NSAP. Given the apparent exclusion at the macro level and the gram panchayat-wise lists which will now be available through SECC, there are high expectations that coverage under the program will be substantially increased.
Does the 14th Finance Commission give states deeper pockets for pensions?
The NSAP is among the schemes that will continue to be fully funded by the Central government even as the 14th Finance Commission recommended greater fund devolution to states. However, the current fund allocation for NSAP falls far short. Not only was the budget outlay for NSAP for 2014-15 slashed by 30% from Rs 10,635 crore to Rs 7,187 crore, for the first time in five years the budget outlay itself has decreased in 2015-16 to Rs 9,082 crore.
This decrease in budget outlay even as all field based research points to the need to expand coverage is not encouraging. More so, what this distracts from is the sore need to increase the actual amount of old age pension. The Central government still provides only Rs. 200 per month without any indexation to inflation. While several states top-up this amount, varying from the recently increased amount in Telangana (Rs. 1000) to nil in Madhya Pradesh (Rs. 200), fair indexation is crucial and needs to be provided by the Centre. Therefore, the current outlay is acutely inadequate even to meet the existing social security commitments towards the elderly. When the scheme itself is starved of funds, what miracle is the JAM architecture expected to perform?
This academic discourse echoes peoples’ campaigns on the same issue. The Pension Parishad since 2012 has been advocating an increase in pension to Rs. 2000 per month, or half the monthly minimum wage of the state – whichever is higher, along with indexing it to inflation. Scores of case studies testify to the fact that these pensions act as a lifeline to the poor.
States with the intent to provide social security to the elderly have been consistently doing so, and greater fund devolution is no doubt welcome. However, the role of the Central government is essential to providing a basic minimum amount, given the nature of the demographic. Its role in setting principles in the execution of social policy like old age pensions remains paramount.
What is to be done
The Ministry of Rural Development has itself brought in several corrective measures in the form of revised October 2014 operational guidelines for the NSAP. These lay out the guiding principle that disbursement of pension should be at the convenience of the beneficiary and as per her or his choice. The guidelines also introduce the concept of universal coverage and pro-active identification of beneficiaries by gram panchayats and municipalities.
To conclude, the strides made in implementation need to be capitalised on. JAM doesn’t provide much of a value add for NSAP with the state adapted delivery systems working moderately well. The SECC on the other hand, offers an opportunity to demonstrate correct identification and universal coverage. The 14th Finance Commission highlights the need of the Centre to provide adequate funds to the program. This – coupled with a political commitment to increase and index the pension amount – has the potential to set a global standard in cash transfers as effective social security.
Anindita Adhikari is a doctoral student at Brown University.
Inayat Sabhikhi is a Project Executive with the United Nations Development Program.