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Social security measure a must before second generation reforms, exhort experts

Experts today called upon the government to ensure that adequate safety nets and social security measures were in place before launching the second generation reforms to ensure protection to weaker groups.

Such protection for the marginalised groups was essential, as the south Asian experience had demonstrated. The poor and fixed income groups in these countries had suffered enormously during the crisis because of inadequate protection and large-scale unemployment.

This was the consensus which emerged at a three-day international conference on "Social Security Policy: Challenges before India and South Asia'' which concluded in New Delhi today.

Nearly 80 experts including officials of the World Bank, International Labour Organisation, Asian Development Bank, senior government officials, policy-makers, academics and financial market specialists from India, Sri Lanka, Bangladesh, Nepal and Malaysia and Australia deliberated on various dimensions of the issues.

The conference was organised by the International Centre for Development Research with cooperation from the Research and Information System for the non-aligned and other developing countries, a New Delhi-based think tank in collaboration with the World Bank Institute, Washington.

The summing up of the conference was done by Dr V R Panchamukhi, director-general, RIS, and chairpersons of various sessions. These were Surendra Dave, chairman, expert committee for developing a pension system for India (Project OASIS), Dr Robert Hollzmann, director, social protection, World Bank, Dr Michele Ribound, manager, human development, World Bank Institute.

Dr Panchamukhi said the nomenclature 'second generation reforms' may not be very appropriate as reforms have been on since 1970s when suggestions of opening up of international trade and other sectors of the economy started getting implemented.

Dr Panchamukhi said a committee headed by him had suggested gradual phasing out of the non-tariff barriers and giving more credence to tariff barriers. There has been gradual opening up of the economy. However, since reforms were outlined in a more bold manner since 1991, the concept was being used now as second generation of reforms.

Dr Panchamukhi said it was essential that social security policy did not destroy cultural ethos. Conceptual aspects of social security were important, he said. In the Indian case, the role of the family should be kept in perspective while implementing social security measures.

Dr Panchamuki said social security was more an attitudinal problem. Society should be caring and not competitive.

There is need to integrate development policy into social security.

The conference was regarded as taking place at an appropariate time as 1999 has been declared as the ''International Year of Older Persons.''

The conference highlighted the imperatives of India's pension system, reforms in the face of dramatic changes in demographic, economic and social conditions taking place in India.

It was argued that the pension systems in the government sector and under provident funds constitute a financial time-bomb for the country. For instance, there has been a steep rise in pension obligations faced by the government with regard to employees in railways and defence.

The retired employees in these two ministries comprise 80 per cent of the total number of retirees and about 75 per cent of the total payments of the central government. With increasing life expecancy and increasing average age of employees of these sectors, the pension burden in these sectors will grow rapidly and will constitute a high and increasing percentage of the revenue budget of these ministries.

The conference said: the government would thus face a choice between granting a sharp increase in the budgets of these ministries or risk a relative decline in their developmental expenditure with adverse consequences on their productivity.

The Pension Act of 1995 imposes unmanageable financial burden. Contrary to the world wide trend of moving from defined benefit pension systems to defined contribution systems, the Pension Act of 1995, moved the Indian pension system from DC to DB. It was argued that the provident fund is likely to face a financial crisis in meeting its obligations over the medium and long-term due to a variety of factors.

The conference also emphasised that safety nets should be strengthened. Emphasis was laid on the imperatives of proper investment of pension funds, too.

The conference concluded with suggestions on broad directions of reform on which further research and consensus building for policy actions are needed.

Among the proposals made at the conference include evolving an integrated social security police framework., increasing, in phases, the age of retirement to 65 by 2010, revising the Pension Act of 1995 to revert to defined contribution system with annuities, movement towards funded individual accounts for the pension system for government employees and organised sector enterprise employees with greater role of the individual account holders with regard to investment of the funds in individual account, and developing institutional structure and information system for better utilisation of the working abilities of the elderly.

The conference pinned down the contours of economic reforms in the South Asian region and evaluated their labour market consequences.

It highlighted trends of low labour-absorption due to increasing wages and new technologies. Given the possibilities of labour redundancies, it reiterated the need for devising social safety nets in India and other South Asian countries.

The conference also discussed the experiences of Australia, Malaysia, India, Sri Lanka, Bangladesh and other countries for drawing lessons and challenges for south Asian countries.

It discussed the pension system reforms that are being undertaken in different parts of world and issues related to the reform of the pensions systems in South Asia.

Besides, it also discussed the safety nets and social security measures for the uncovered elderly poor. The special session was devoted to financial markets and investing of pension funds assets.

The conference deliberated upon various dimensions of social security programmes for the unorganised sector in India to which around 90 per cent of total workers belong. It was noted that economic growth and human development should go together in order to create opportunities for the unorgansied sector workers.

The conference analysed in detail the issue of economic growth not being correlated with some of the human development indicators. Financing requirements of social security programmes especially in poorer states in India were also analysed.

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