How has economic liberalisation impacted on India’s labour market? How will it affect the provision of social security? This paper for New Delhi’s National Academy for Training and Research in Social Security shows that liberalisation has led to a rise in financial vulnerability among the population. It argues that privatising the welfare state would exacerbate poverty.
Since the early 1990s, India’s economy has opened up to market forces, changing the structure of its labour market. There has been a decline in regular waged employment, and a rise in the number of casual employees and informal sector workers. At the same time, the country’s population is aging. This translates into heavier demands on the welfare state. Yet the government is under pressure to reduce its role in social security provision. In countries like India, where so many are poor, liberalisation measures such as privatising pensions could prove disastrous.
Various sets of data show the changes occurring among India’s aged and working populations. Restructuring in the public and corporate sectors has resulted in redundancies, outsourcing and the casualisation of employment. Both the old and the young are becoming increasingly vulnerable. Key trends are that:
- The proportion of the population aged 60 or above is predicted to grow by over two percentage points between 1996 and 2016. Around three-quarters of the aged are economically dependent on others.
- As companies restructure and jobs become less secure, the young are finding it harder to support elderly relatives. Some 21 million people above the age of 60 are still working in order to survive financially.
- The availability of regular waged jobs decreased dramatically in the 1990s, and organised private-sector employment has fallen since 1999.
- Rationalisation in the public sector has seen jobs decrease steadily since 1998.
- The percentage of casual employees in the workforce has grown rapidly in urban and rural areas. In tandem, the number of unorganised workers has grown at double the rate of organised workers.
When poverty is high and growing numbers of workers have no protection, the state has a greater responsibility to ensure the welfare of its citizens. However, proponents of economic liberalisation are pressuring governments to allow private players into social security provision, especially pensions. In India, various proposals have been made, which are criticised here as damaging for the poor:
- One committee recommended that the government should withdraw from pensions, and all individuals should save for their own retirement. However, wage levels would make this impossible for most.
- Another suggestion was to allow private players into the pensions market and encourage investment in equity markets. However, this ignores the risks of shares, and would benefit only financial institutions.
- The financial liberalisation pursued by developed countries is inappropriate for India, where there is strong trust in the welfare state and so many live below the poverty line.
- Moreover, India has not yet reached an optimal level of social security spending, nor ratified international minimum standards of social security.
- Thus the government should resist pressure to liberalise further, especially in the area of welfare provision.
