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FEATURE STORY February 20, 2019

Schemes to Systems: The Future of Social Protection in India


World Bank

Between 1997 and 2017, India’s per capita national income increased more than four-fold. The pace of poverty reduction also accelerated, with a similar three-to fourfold increase in the rate of poverty decline after 2000.To progress further, India needs to create a large, productive and healthy middle-class. This requires sustained expansion of good jobs, human capital and equal opportunities. While India faces an exceptional task due to its continent-like-size and diversity, it doesn’t have to tackle challenges posed by pursuing fast-paced economic transformation in isolation.

International experience holds important insights, particularly on how strong social protection systems can support the growth process. Most G20 countries have increased expenditures on social protection as they grow. Why? Because while growth can lift people out of poverty, it cannot ensure escape from vulnerability to crises. Rich countries invest significantly in protecting their citizens from risks posed by hospitalization, disasters or old age.

Moving forward, social protection in India is poised for a fundamental transformation from a set of fragmented schemes to an integrated system – a fundamental point missed in the simplistic discussion about Universal Basic Income (UBI) or quasi-UBI measures such as guaranteed income support. Successive state and central governments in India have invested in important building blocks of a social protection system. Budgets have been enhanced, a larger number of people are being covered, and a series of new programs have been launched with a focus on rights-based entitlements and technological innovations.  The Socio-Economic Census (SEC) in 2011 – which collected new census data on asset and socio-demographic information can make the beneficiary identification process more transparent. Moreover, government-to-person payments have received strong impetus through campaigns to open bank accounts and to transition to digital payments through the Direct Benefit Transfer (DBT) initiative. The NITI Aayog and the Fourteenth Finance Commission have also enabled a framework for consolidation of schemes and for states to gain greater fiscal autonomy. New insurance schemes for health, life, crop-failure and accidents have been announced and given priority. India has signed on to achieve the UN SDG calling for “nationally appropriate social protection floors and systems”. But progress towards outcomes remains ad-hoc, often restricted to specific schemes and states. And, the jump towards UBI or guaranteed income may fall into a similar trap. Instead, the focus needs to be on transitioning the many innovations that currently operate in silos into a harmonized and scaled-up system of social protection. How should this be done?

"Social protection in India is poised for a fundamental transformation from a set of fragmented schemes to an integrated system"
Junaid Ahmad
Country Director, India, World Bank


Rich and Middle-Income Countries Spend Significantly on Social Protection
 Percent of GDP Spent on Social Protection in Selected Countries 2013-2017

Note:  The graph shows protection expenditure as a percentage of GDP for select countries for the latest year available. Definition of social protection expenditures are broadly consistent across sources of data. Spending on social protection in India, Brazil, China and Indonesia includes active labor market programs, social assistance for the poor and target groups through cash or kind transfers, social insurance (excluding military pensions) and elderly support. For OECD countries, social protection expenditures include active labor market programs, government contribution to pensions and elderly support, income support to the working-age population through incapacity benefits, family cash benefits, unemployment support and other public social services.

Source: OECD SOCX Database 2014, ADB SP Database 2016, World Bank Brazil Public Expenditure Review 2016 and India Union Budget 2018.

At this stage of development,

A strategy assumes significance because a large share of social protection schemes operating in modern India are designed for the past. As they say, “The past is a foreign country, they do things differently there” and India, even of the recent past of 1977, was mired in chronic poverty, with a largely agrarian labor force, and barely networked.  That India now only exists in pockets – majority of the country has seen booming tele-digital and transport connectivity, sharp declines in income poverty and new neglected sources of risks related to climate, urbanization and migration. This is an important policy and cognitive shift and requires national and state governments to establish a nodal policy vehicle through which strategic thinking and coordination across schemes and states can be achieved.

As India moves towards defining a social protection strategy for its future, international experience suggest three important lessons.

Global experience highlights that universal and adequate insurance cannot be achieved by hundreds of state and central schemes operating in silos. Emerging economies have focussed on comprehensive coverage through program consolidation and convergence. Countries like Brazil have streamlined schemes and established integrated platforms which combine delivery of cash transfers to poor households with delivery of health, nutrition and education. China and Indonesia implement less than ten national social assistance programs respectively, far fewer than the hundreds of benefit transfer schemes managed by national and state governments in India. 

International experience also emphasizes the need to move away from a one-size-fits-all model by allowing sub-national governments greater flexibility as political economy, labor markets, demographic attributes and risk profiles vary by location. The Chinese, Brazilian and Indonesian social protection architecture are heavily decentralized enabling local governments to design, plan and deliver a core basket of benefits within a nationally defined policy framework and budget.

Most importantly,  Of late, there appears to be a growing political appetite to consider quasi-universal basic income (UBI) schemes at the national and state level. The 2019 budget has emphasized monthly farmer income support and Sikkim plans to implement full UBI.  However, these programs require a strong tech-enabled delivery chain which can target and administer benefits. Ensuring technology is leveraged effectively without triggering exclusion and privacy violations requires robust regulation. As more flexibility is given to states, their capacity to plan, learn and implement programs must also be strengthened, particularly at the sub-district level. Countries like Brazil and Mexico have invested heavily in local administration and social workers to manage dynamic social registries and public dealing. Designing solutions to local problems will require a frontline administration which has the time, talent, tools and authority to innovate and respond to citizen concerns. Lessons from the last-mile infrastructure created in other countries can help India design its own technology and rights enabled local state. 

. It’s time to think beyond singular schemes. A broader social protection strategy for a more urban, middle-income, mobile, diverse and decentralized India is urgently required.

The article has been authored by Junaid Ahmad, Country Director, India, World Bank. An abridged version of this article was originally published in the Indian Express on February 19th, 2019.