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India’s Social Security System: An Assessment

Asher, M.G. and Bali, A.S. (2010) India’s Social Security System: An Assessment. In: Asher, M.G., Oum, S. and Parulian, F., (eds.) Social Protection in East Asia – Current State and Challenges. ERIA Research Project Report 2009-9. ERIA, Jakarta, pp. 399-423.

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India is a federal country comprising 28 States and seven Union Territories. It gained independence in 1947. After following relatively inward-looking economic policies for several decades since gaining independence, India adopted an open-economy - open-society strategy of economic growth in 1991, with the aim of integrating with the world economy in a market-consistent manner (Kelkar, 2004).

As India addresses the challenges of the twenty-first century and manages its rise globally, constructing and implementing a modern social security system represents one of its major imperatives. A modern social security system can enable India to cushion the burden on workers of restructuring public and private organizations; to increase the legitimacy of further reforms; and to encourage individuals and firms to engage in entrepreneurship and make creative career choices. All three are essential for India to emerge as a resilient knowledge-driven economy and society.

This paper analyzes India’s social security system, with primary focus on pensions or retirement income arrangements. It also discusses reform themes which the policymakers and provident and pension fund organizations may consider in improving the sustainability, coverage and resilience to economic and other shocks of the current system. The paper is organized as follows. In section II, a broad overview of macroeconomic, demographic and labor market trends is provided. This is followed by a discussion of India’s current social security system and its various components in section III. As social security related services must be provided by organizations, this section also provides suggestions for improving their effectiveness. Section IV provides a brief overview of India’s healthcare financing system. The final section suggests five broad reform themes designed to transform the current system into a system more appropriate for meeting India’s social security challenges in the 21st century.

Item Type: Book Chapter
Publisher: ERIA
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