Social Security System in India: An International Comparative Analysis

Jha, Rupak Kumar and Bhattacharyya, Surajit (2010): Social Security System in India: An International Comparative Analysis.

Abstract

This paper examines selected components of social security system in India and compares them with their OECD counterparts. Historically, the Indian policy makers have viewed the pension system as a welfare measure and therefore, it lacks in financial professionalism, diversification, and in the belief that pension funds can also be treated as an asset. The Indian system is biased towards the organized formal sector as workers in this sector are benefitted with the provisions under various labor laws. Even then the pension provisions in India are way far behind the OECD benchmark. In the unorganized sector, old age income remains mainly confined to voluntary savings. The New Pension System although makes the pension amount an old age asset, is silent on the social security provisions to the poor. The average income earners are not able to replace their pre-retirement earnings with pensions compared to most of the OECD countries. In terms of the gross pension wealth, India is nearer to the OECD average only in the low income category for men. Out of 5% of health care expenditure as a percentage of GDP, government’s share in India accounts even less than 1% which is significantly lower than the OECD benchmark.

• Item Type: MPRA Paper
• Language: English
• Keywords: Social Security System, Pension Funds, India, OECD.
• Subjects: A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

References

Aaron, H. (1967), ‘Social Security: International Comparisons, in Studies in the Economics of Income Maintenance’, Otto Eckstein (ed.), The Brookings Institution (Washington), 13-48.

Ando, A. and F. Modigliani (1963), ‘The Life Cycle Hypothesis of Saving: Aggregate Implications and Tests’, The American Economic Review, Vol. 53 (1), 55-84.

Asher, M. G. (2006), ‘Pension Issue and Challenges Facing India’, Economic and Political Weekly, Vol. 41 (45), 4638-4641.

Ashraf, N., Gons, N., Karlan, D. S. and W. Yin (2003), ‘A Review of Commitment Savings Products in Developing Countries’, http://people.hbs.edu/nashraf/commitmentreview.pdf

Banks, J., Blundell, R., and S. Tanner (1998), ‘Is there a retirement-savings puzzle?’, American Economic Review, Vol. 88 (4), 769–88.

Barro, R. J. (1974), ‘Are government bonds net wealth?’, Journal of Political Economy, Vol. 82 (6), 1095–1117.

Cagan, P. (1965), ‘The Effect of Pension Plans on Aggregate Savings: Evidence from a Sample Survey’, Occasional Paper No. 95, NBER.

Deaton, A. (1991), ‘Saving and Liquidity Constraints’, Econometrica, Vol. 59 (5), 1221–48.

Denton, F. T. and B. G. Spencer (1981), ‘A Macro-Economic Analysis of the Effects of a Public Pension Plan’, The Canadian Journal of Economics, Vol. 14 (4), 609-634.

Dornbusch R., Fisher S. and R. Startz (2005), Macroeconomics, New Delhi. Tata Mc-GrawHill Publishing Co. Ltd.

Eisner, R. (1983), ‘Social Security, Saving and Macroeconomics’, Journal of Macroeconomics, Vol. 5 (1), 1-19.

Feldstein, M. (1974), ‘Social Security, Induced Retirement, and Aggregate Capital Accumulation’, The Journal of Political Economy, Vol. 82 (5), 905-926.

Feldstein, M. (1977), ‘Social Security and Private Savings: International Evidence in an Extended Life-Cycle Model’, in The Economics of Public Services, Martin Feldstein and Robert Inman (ed.), London, 174 –205.

Jha, R. K. (2009), ‘Social Security System in India: A Comparative Analysis in The International Context’, unpublished M.Phil Thesis, Indian Institute of Technology Bombay, Mumbai.

Kopits, G. and P. Gotur (1980), ‘The Influence of Social Security on Household Savings: A Cross-Country Investigation’, IMF Staff Papers, Vol. 27 (1), 161-190.

Laibson, D. (1997), ‘Golden Eggs and Hyperbolic Discounting’, Quarterly Journal of Economics, Vol. 112 (2), 443-77.