Posts Tagged ‘India’

demanding old age pensions in India

Friday, September 28th, 2012


An elderly man attended a protest to demand universal old age pension in New Delhi, Wednesday [29 August]. The protestors demanded a pension amount of $36 per month as opposed to the government’s proposal of $9 per month.

Asia in Pictures“, Wall Street Journal online, 30 August 2012.

toward universal pensions in India

Thursday, August 30th, 2012

A movement for universal pensions is gathering momentum in India. Pension Parishad, a non-governmental movement to secure a universal pension for all workers, was born on 24th and 25th February 2012 in Pune, ‘cultural capital’ of the state of Maharashtra. From May 7th to May 11th 2012 Pension Parishad launched its campaign with a dharna (protest) by more than 5,000 elderly persons at Jantar Mantar, New Delhi. Prabhat Patnaik, a well-known Indian economist, describes the movement and its demands.

[T]he demand for a non-contributory scheme is derivable from the rights-based approach, as indeed is the demand for universality. Of course the “old” are not the only deprived section in our population; poverty, deprivation and hunger are rampant in our country, but that is an argument for extending the right to adequate means of livelihood to all, not for denying it to the “old.” ….

[T]he Pension Parishad, which organised the Jantar Mantar dharna [protest], sees pensioners as “workers” and hence entitled to a proportion of the wage income as pension. Based on this, the Parishad has demanded half the monthly minimum wage rate, or (in view of the differing minimum wage rates across States) a flat amount of Rs.2,000 [US$40] at the current price, whichever is higher. … [T]he point to note is that … the monthly pension payment should be far higher than the current measly sum of Rs.200 [US$4].

The Pension Parishad estimates that [those older than 60 years number about 100 million people] …. With some exclusions, e.g. those who pay income tax, or those belonging to the organised sector whose pensions already exceed the stipulated amount, …, that would still be around eight crore [80 million] people to provide for. At the rate of Rs.2,000 [US$40] per person per month, the total would come to Rs.192,000 crore [US$34.5 billion] which, in round figures, is two per cent of the GDP.

Questions will be immediately raised on how such resources can be found. But the required resources can be put in perspective as follows: the growth rate of the economy, as the Union government never tires of repeating, has been around eight per cent, or, in per capita terms just over six per cent. The resources required will be only one third of the increase in per capita income, i.e. a third of one year’s increase in the per capita income collected from the “average” Indian will be adequate to finance a universal pension scheme. …. This surely is affordable, especially when the Centre [central government?] has given away Rs.500,000 crore [US$90 billion] per annum, i.e. more than double the amount needed for a pension scheme, in the form of corporate and other tax reliefs in recent budgets.

Prabhat Patnaik, “For a universal old-age pension plan“, The Hindu, 10 May 2012.

This ‘universal pension’ leaves 20% of the age-qualified without benefits. The pension, then, is not universal. It promises a Universal Minimum Pension, but adds an income test by excluding those who have taxable income in old age. It is a pity that the movement chose to demand a less-than-universal pension, since ending tax relief on retirement saving alone would almost certainly cover the cost of extending a two thousand rupee pension to the entire 60+ population, with money left over.

The proposed ‘pension test plus income tax test’ nonetheless is a huge improvement over current means tests. The tests are simple, non-intrusive, and cost almost nothing to administer. Anyone over the age of 60 without a pension who pays income tax forfeits her right to a ‘universal’ pension for the year or years of her income tax returns. The question is, why deny pensions to taxpayers, when government provides these same people with subsidies (tax relief) for retirement savings? Wouldn’t a flat, universal pension be more attractive than tax relief for those on the lower rungs of the taxpayer ladder? And a portion of the pension could be recovered from higher-income pensioners simply by taxing the benefit as income. As for those who receive employment-based pensions, taxable or not, including them can increase support for a universal pension, at a relatively small fiscal cost.

Economist Prabhat Patnaik (born 1945) was a member of the Faculty of Economics and Politics of Cambridge University (UK) from 1969-1974. He taught from 1974 to 2010 at the Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University (New Delhi) and is now Emeritus Fellow at the same institution.

For more information on Pension Parishad, including videos with interviews of an activist and TV coverage of the May protest, go to HelpAge’s Pension Watch.

absent teachers

Sunday, June 17th, 2012

Teacher absenteeism is a problem in many low-income countries. Timothy Taylor discusses an experimental attempt to improve teacher attendance in the tribal villages of Udaipur, India. Teachers at 60 ‘treated’ schools were asked to take time-stamped photos of their class at the beginning and end of each school day. Compliance (and non-compliance) was linked to pay. The researchers then compared absenteeism in the treated schools with absenteeism in 60 otherwise similar untreated schools.

The experiment was successful. Teachers responded to incentives, and absenteeism fell sharply: down from two of every five days to one of every five days. This is still a high rate of absenteeism, but the saddest part is that

the entire … study was carried out in “nonformal education centers,” rather than schools, and using “para-teachers,” rather than regular teachers. The reason is that in India, as in many other low- and middle-income countries, teachers are a highly organized labor group that politicians don’t dare to cross, and so proposals to increase the dismally low levels of teacher attendance don’t even happen in the regular school sector.

Timothy Taylor, “Teacher Attendance and Digital Cameras: An Experiment“, Conversable Economist, 15 June 2012.

Read the entire post, which is very informative. The main study, by Esther Duflo, Rema Hanna, and Stephen P. Ryan, was published in the June 2012 issue of the American Economic Review. An ungated version can be downloaded here.


India’s “right to work” scheme

Thursday, April 19th, 2012

A 12-year old scheme is supposed to guarantee full employment for unskilled workers in rural India. Four World Bank researchers evaluate its performance, and find it wanting.

In 2006, India embarked on an ambitious attempt to fight rural poverty. The National Rural Employment Guarantee Act of 2005 created a justiciable “right to work” for all households in rural India through the National Rural Employment Guarantee Scheme, renamed the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in 2009. This promises 100 days of work per year to all rural households whose adults are willing to do unskilled manual labor at the statutory minimum wage notified for the program. Work is to be made available to anyone who asks for it within 15 days of receiving an application to work, failing which the state government is liable to pay an unemployment allowance. ….

[So, how is the scheme working? We find that] actual participation rates in the scheme are not (as a rule) any higher in poorer states where it is needed the most. The reason for this paradox lies in the differences in the extent to which the employment guarantee is honored. The answer to the question posed in our title is clearly “no.”

Puja Dutta, Rinku Murgai, Martin Ravallion and Dominique P. Van de Walle, “Does India’s Employment Guarantee Scheme Guarantee Employment?“, World Bank Policy Research Working Paper 6003 (March 2012).

States are responsible for paying 100% of unemployment allowances, whereas the central government picks up 100% of the tab for wages, three-quarters of the non-wage component of MGNREGS projects, plus an additional 6% to defray administration costs.

How much, precisely, is the unemployment allowance? This is not reported, but can be found online. According to this site, “The rate of employment allowance shall be one forth [sic] of the wage rate for the  first thirty days and not less than one half of the wage rate for the remaining period.” That should encourage states to provide MGNREGS jobs for all who seek them. It doesn’t because governments are not following the spirit or the letter of the law. This reason “virtually no un-met demand for work on MGNREGS” is recorded is simply that “state and local governments have an incentive not to report un-met demand given that this implies they should pay unemployment allowances.” These same governments also have an incentive to see that local job-seekers are kept in the dark, ignorant of their legal rights.

superbugs from India

Saturday, March 31st, 2012

Overuse of antibiotics and poor sanitation in India have created a very nasty form of antibiotic-resistant bacteria against which even last-resort drugs are powerless. Thanks in part to medical tourism, these superbugs will be coming soon to a hospital near you.

[I]n 2010, a study of a New Delhi-area hospital found that 24 percent of bacterial infections there could resist the last-resort carbapenem antibiotics. Thirteen percent not only resisted carbapenem drugs, but overcame 14 other antibiotics, making treatment options exceedingly limited. The gene that conferred this extreme drug-resistance was dubbed “New Delhi metallo-beta-lactamase 1” or NDM-1. Scientists found that, unlike other drug-resistant bacteria, NDM-1 bacteria are able to quickly and prolifically spread their genes to other bacteria, easily jumping the barriers of species and genus. The pandemic potential of such a microbe is enormous. Indeed, according to Tim Walsh, a University of Cardiff medical microbiologist who has been chasing the dangerous gene, NDM-1 infections already turned up in more than 35 countries last year — often in the bodies of medical tourists, who had traveled to India or Pakistan for cheap surgeries and other procedures.  And NDM-1 bacteria have also been found in drinking water and in puddles around New Delhi. ….

[T]here are only two imperfect drugs that can treat NDM-1 infections. The first, an antibiotic called colistin, was first sold over fifty years ago and fell into disuse in the 1980s, when less toxic drugs were developed using more modern methods. The second, tigecycline, is a pricey intravenous drug approved only for soft-tissue infections, not the urinary tract infections and pneumonias that comprise the majority of hospital-acquired infections. With more frequent use of these two limited drugs, it will be only a matter of time before NDM-1 bacteria can resist them as well.

Sonia Shah “When Superbugs Attack“, Foreign Affairs, 28 March 2012.

Science journalist Sonia Shah is author of The Fever: How Malaria Has Ruled Humankind for 500,000 Years (Farrar, Straus and Giroux, 2010). You can view her slide show here.

governance in India

Saturday, March 17th, 2012

Agricultural economist Gautam Pingle explains why corruption is endemic in India’s civil service.

It is not so much that government salaries are inadequate to maintain life and family – relative to the average household income these are high and secure incomes with pensions attached – it is that in order to get such a job, the employee would have paid a large bribe, and even an additional one thereafter to get a “good’ posting (where he or she can make more in bribes). As such, bribery is seen by government employees in India as a (hidden) rate of return on forced investment.

Gautam Pingle, “Vicious circle of Indian corruption“, letter to the editor, Financial Times, 17 March 2012.

Dr Pingle is Director, Centre for Public Policy, Governance and Performance, Administrative Staff College of India. I note that both democratic India and authoritarian China suffer from rampant corruption. (See yesterday’s TdJ on “China’s model of development”.)


targeting the poor is not easy

Friday, June 3rd, 2011

India has made great efforts to target or ‘tag’ the poor. Three times its government tried to enumerate all poor households in the nation, while excluding non-poor from the poverty list. Each attempt failed. A fourth attempt will soon be launched. This, too, will predictably fail.

The Union cabinet last week paved the way for the new round of the below poverty line (BPL) census to be conducted later this year. The new census assumes importance given the dissatisfaction with the previous three attempts to identify the poor. It is also important because BPL census remains the primary delivery mechanism for the majority of our social protection schemes, including the much-maligned public distribution system and most social pension programmes.

But can the new BPL census provide answers to the targeting problems that have ailed our subsidy delivery system? Not really, though the proposed methodology will reduce, albeit to a limited extent, the earlier inclusion and exclusion errors. ….

The pilot data suggests that even with the best of designs, the error rate would remain at around 20%. That number is bound to go up when the survey goes and hits the field. This would be partly due to errors in implementation, but also due to vested interests trying to corrupt the system by wilfully concealing information. In the end, the method may reduce the errors in identifying the poor, but may not eliminate them altogether. ….

The more important message emerging from the pilot is the fact that it is almost impossible to have a method of perfect targeting. This should not be surprising to those who are aware of previous experiences of targeting …. For the record, inclusion errors in Brazil are close to 49% (that is, half of the beneficiaries are non-poor) and in Mexico, 36%. The corresponding exclusion errors (percentage of non-beneficiary poor to total poor) are 59% in Brazil and 70% in Mexico. Incidentally, both these countries have been highlighted as success stories of cash transfers.

Himanshu, “The trouble with finding the poor“, Live Mint, 24 May 2011.

Himanshu is assistant professor in the School of Social Sciences of Jawaharlal Nehru University in New Delhi.

Thanks to Charles Knox at HelpAge International for the pointer.

universal pensions in Mexico City

Friday, March 11th, 2011

Mexico City is celebrating the 10th anniversary of its universal age pension. The programme was created in 2001 by Andrés Manuel López Obrador, who was mayor of the city at that time. In November 2003 the Legislative Assembly of the Federal District (Mexico City) converted the programme into law.

The pension was initially given to all residents 70 years of age or older. The age of eligibility was lowered to 68 in the year 2009. Each pensioner receives a debit card. The pension – currently 897.3 pesos (75 dollars) – is credited to the card each month and pensioners can use it to purchase food and basic necessities in any of a number of supermarket chains in the city. Each pensioner also has access to free health care and free public transportation.

Mexico City is an example for Mexico and the world. Its universal pension has functioned smoothly for 10 years, without a hint of corruption – this in a country that is not noted for absence of corruption. The pension is modest, but an important sum for many who live in a city where the minimum wage is only 57.46 pesos (less than 5 dollars) a day. And the pension is available to the elderly not as charity, not as welfare, but as a right, and without payment of bribes (‘mordidas‘).

Andrés Manuel López Obrador once explained that he considered applying a means test to the age pension, but decided against it. How many of the elderly in Mexico City can be considered wealthy, he asked? No more than 5%! The administrative cost of removing such a small group from the pension list would exceed any fiscal savings.

What López Obrador did not say, but is equally important, is that the absence of a means test limits the power of bureaucrats, who then find it difficult to demand money from an elderly person in order to ‘expedite’ his or her application. With means tests, bribes are common. In India, for example, tiny non-contributory age pensions are given to those on the BPL (Below Poverty Line) list. It is common knowledge that payment of a gratuity is very often necessary – and sufficient – to  be classified as BPL. When the only requirement is proof of age and proof of residence, the bureaucrat has little control over the process.

For more information (and wonderful photos), see this newspaper article (in Spanish):

Berenice Balboa, “Recorrido por una década de Pensión para adultos mayores“, El Universal.df, 7 March 2011. 

HT Charles Knox of HelpAge International.

India’s infrastructure needs

Friday, December 31st, 2010

Some thoughts inspired by Chinese Premier Wen Jiabao’s tour of India (15-17 December):

India’s economic momentum is impressive …. But it is achieving this development in spite of its infrastructure, not because of it. Road traffic is slowed by single lanes and uneven surfaces. Ships take almost 96 hours to unload and load at Indian ports, about 10 times longer than in Hong Kong. And 18 per cent of India’s urban population defecates daily in open spaces, compared with 6 per cent in China. [emphasis added]

Unlike China, of course, India is burdened by democratic government, a respect for private land rights, and a very zealous Environment Ministry, which means that the state cannot simply bulldoze settlements or drain wetlands to make way for power plants.

Lex, “India”, Financial Times, 30 December 2010.

The ‘Lex’ business and finance column is published daily in the Financial Times. It is written anonymously by a team of eleven FT journalists: six based in London, four in New York and one in Hong Kong.

India’s unemployables

Tuesday, October 5th, 2010

Today’s Financial Times has an excellent article on India’s poorly trained youth.

As economies worldwide – including fast-growing rival China – grapple with the cost of ageing populations, India, with 1.2bn people, growth of 8.5 per cent a year  and a pro-western business elite, is widely expected to be an engine of global growth, both as a market for multinationals and as part of the global supply chain. Its estimated 4m English-speaking software engineers and call-centre workers – as well as talented scientists and investment bankers – create the aura of an emerging knowledge superpower, brimming with untapped talent waiting to be absorbed.

In reality, however, about 50 per cent of the population still lives in rural areas and works in agriculture. Pressures on land are pushing many to seek other opportunities, potentially unlocking a huge manpower reservoir. Many question whether India, with its weak physical infrastructure, restrictive labour laws and stunted manufacturing sector, can create enough work to absorb them.

An even bigger worry is whether most young Indians have, or can be given, the skills required to fill those jobs already available or rapidly being created, both white and blue collar. ….

The crux of the labour problem – the poor employability of many young people – is reflected in the paradox of high unemployment coupled with labour shortages.

Despite the ostensibly favourable demographic trends, companies complain of difficulties recruiting and retaining qualified staff, whether civil engineers and software developers or bricklayers, waiters and shop assistants. ….

Close to one in three of those aged 15 to 35 is functionally illiterate, according to the National Sample Survey Organisation’s most recent data. States with the fastest-growing young populations tend to be the poorest, with the weakest schools and lowest literacy rates. Even rural youths who achieve basic literacy rarely have any vocational training.

While India boasts a few tiny bastions of world-class excellence in higher education, many of its other institutions churn out degree holders who are barely prepared for work. As a result companies must invest heavily in training, adding to their costs.

Amy Kazmin, “India: Labour to unlock”, Financial Times, 5 October 2010.

Ungated version here.