Context

• India’s old age poverty will be big by 2050. Only 2% informal workers have invested in NPS.

Why is age a cause of poverty?

• The “oldest-old”, aged 80 years or over, are less able to work than younger older persons; are more likely to have spent their savings; and are most in need of age-appropriate health and long-term personal care services.

How age induces poverty in India?

• India has no legal provisions for income security of the elderly, making the impacts of ageing far harsher for those who are already economically vulnerable.
• Deteriorating brain and muscle capacity are largely non-negotiable facts of life, limiting one’s ability to get a job or remain employed.

Reasons for old age poverty

• Dependency: A large section of the senior population in India is still dependent on the joint family set up for their senior care and post-retirement needs, with financial planning for retirement taking a back seat.
• High population: An increase in the number of seniors in India will reduce the percentage of India’s human resource capital and its ability to drive economic growth.
• Low insurance penetration: This highlights the inadequacy and underscores the critical need to streamline retirement planning schemes and strengthen the pension programs in the country. There is a lacks of social security framework.

Data to remember

People employed in the unorganised sector form around 90 per cent of India’s workforce.

How to assure wellness and dignity to elders?

• Income security in the form of monthly pensions either state-assured or employment-linked has been one of the most prevalent modes of assuring continued wellness and dignity against the life-shock of ageing.

Addressing the roadblock

• Universal pension program: Income security in later years stems from multiple sources such as pensions, insurances (medical and life), Investments. This provides an opportunity for India to create a universal pension program for its 1.3 billion people.
• Financial incentives: There is a pressing need to promote and facilitate fiscal planning in the early years and supplement it with senior-friendly tax structures and integrated insurance products. Such measures can help provide multiple income options to seniors to help them embrace a lifestyle of their choice.
• Regulatory mechanism: A regulatory mechanism will set a viable base rate for the interest accrued on senior citizen deposits and ensure market dips don’t affect retirement income and senior-specific saving plans.

Case study

• Rwanda has achieved roughly 2 million voluntary micro-pension enrolments (30 per cent of its adult population) within three years by making digital account activation easy and simple for informal workers.

Government intervention to improve elderly wellness

• A strong and sustained political commitment,
• A statutory pension sector regulator,
• A well-designed and low-cost NPS product architecture,
• Credible and well-regulated NPS intermediaries,
• Securities market capable of delivering high returns,
• Near-universal banking and mobile penetration,
• The India Stack infrastructure with Aadhaar for easy eKYC, and UPI for secure digital payments.

Conclusion

• The government, Pension Fund Regulatory and Development Authority (PFRDA) and the NPS industry now need to urgently put their heads together and address the obvious supply and demand side barriers. Every day is precious. After all, pension exclusion is akin to climate change. It needs immediate attention. By 2050, India’s problem of old age poverty will have become way too large, too late, too expensive and entirely irreversible.

Mains question

Q. Nearly 400 million young, economically active Indians are slowly walking towards extreme old age poverty in this context how will you explain and analyse the term old age poverty? Suggest some dynamic measures to address this problem.

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