HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR, CHHATTISGARH

Economics Project
Topic: Social Security System in India

Submitted by;

Submitted to;

Tanya Hasija ,

Mrs. Eritriya Roy

Sem- 1, Sec- A, Roll no. - 166

Faculty, Economics

ACKNOWLEDGEMENTS
It gives me immense pleasure to write this project Social Security System in India.
Firstly, thanks to the Almighty who gave me the strength and determination to put all my
endeavours into this work.
Secondly, Id like to thank our Economics faculty, Eritriya Maam for allotting such an
enlightening topic and for all the help and co-operation extended by her in helping scrutinize the
same.
Thirdly, Id like to thank my parents and friends for all their constant support without which this
venture would not have been possible.
Last but not the least, I would like to thank the Library staff and my respected seniors for
extending their help in finding the relevant books and articles required for the work.

DECLARATION
I, Tanya Hasija, a student of Semester 1, Hidayatullah National Law University Raipur, hereby
declare that the project work titled Social Security System in India is a genuine and original
record of work done by me under the able Guidance of Ms. Eritriya Roy, Faculty, HNLU
Raipur.
Tanya Hasija
Semester 1 Section A
Roll No- 166

Brief Overview
Social Security is a comprehensive approach designed to prevent deprivation, assure the
individual of a basic minimum income for himself and his dependents and to protect the
individual from any uncertainties. The State bears the primary responsibility for developing
appropriate system for providing protection and assistance to its workforce. Social Security is
increasingly viewed as an integral part of the development process. It helps to create a more
positive attitude to the challenge of globalization and the consequent structural and technological
changes.

Introduction

Social Security is an instrument for social transformation and progress and must
be preserved, supported and developed as such. Furthermore, far from being an
obstacle to economic progress, as is all too often said, social security organised on
a rm and sound basis will promote such progress, since once men and women
benet from increases security and are free from anxiety for tomorrow, they will
naturally become more productive.
-H.D. Cole (social scientist)

Social security has different meanings in different economies. There is no

commonly accepted definition of social security. The western concept of social
security has greatly influenced the discourse about social security.
International Labour Organisation (ILO) has defined social security in the
following words, " The expression has acquired a wider interpretation in some
countries than in other but basically it can be taken to mean the protection which
society provides for its members, through a series of public measures, against the
economic distress that otherwise would be caused by the stoppage or substantial
reduction in earnings resulting from sickness, maternity, employment injury,
unemployment, invalidity, old age and death; the provision of medical care, and the
provisions of subsidies for families with children."
Burgees, Robin and Nicholas Stern have given a broader perspective for social
security and defined its objective as "to prevent, by social means, the very low
standards of living irrespective of whether these are the results of chronic
deprivation or temporary adversity."
Dreze, Jean and Amartya Sen, "the basic idea of social security is to use social
means to prevent deprivation and vulnerability to deprivation."
According to them, income is one of the most visible and crucial factors restricting
the basic capabilities of many people. In addition to the problem of persistent
deprivation, there is also the issue of vulnerability. They distinguish between two
different aspects of social security, namely, protection and promotion. "The former
is concerned with the task of preventing a decline in the living standards as might
occur, in say, an economic recession, or mostly drastically a famine. The latter
refers to the enhancement of general standards and to the expansion of basic

capabilities of the population, and will primarily have to be seen as a long term
challenge".
According to Hirway, Indira "The concept of social security therefore implies a
broad pro-poor approach which has three components, namely, promotional
component that aims at improving endowments, exchange entitlements, real
income and social consumption; preventive component that seeks to avert
deprivation in more specific ways; and protective component (also termed as safety
net measures) that is yet more specific in generating relief against deprivation".
The above definition has broadened the scope of social security and it concentrates
on employment and income. Programmes and activities connected with the
provision of employment and income be termed as economic security and those
connected with other basic needs such as health, pensions, etc. to be termed as
social security. Economic security and social security are intimately connected.
Economic security is the primary means by which persons are able to obtain their
social security needs. On the other hand, social security is a means to increase and
maintain the productivity of the worker, so as to increase the economic security.

Social security in India

India has always had a Joint Family system that took care of the
social security needs of all the members provided it had
access/ownership of material assets like land. In keeping with
its cultural traditions, family members and relatives have

always discharged a sense of shared responsibility towards one

another. To the extent that the family has resources to draw
upon, this is often the best relief for the special needs and care
required by the aged and those in poor health.
However with increasing migration, urbanization and
demographic changes there has been a decrease in large
family units. This is where the formal system of social security
gains importance. However, information and awareness are the
vital factors in widening the coverage of Social Security
schemes.
In the Indian context, Social Security is a comprehensive
approach designed to prevent deprivation, assure the
individual of a basic minimum income for himself and his
dependents and to protect the individual from any
uncertainties. The State bears the primary responsibility for
developing appropriate system for providing protection and
assistance to its workforce. Social Security is increasingly
viewed as an integral part of the development process. It helps
to create a more positive attitude to the challenge of
globalization and the consequent structural and technological
changes.

Social Security in India

Professor B. P. Adarkar developed the first Social Security scheme in India
in 1944.

 The govt enacted the Employees State Insurance Act, 1948 (ESI Act) to set
up Employee State Insurance Corporation (ESIC).
Employees Provident Fund Act, 1952 was enacted to set up Employees
Provident Fund Organisation (EPFO).
Some earlier schemes like Workmens Compensation Act (1923) paved the
way for workers & families to receive benefits in case of injuries.
The Maternity Benefit Act, 1961 provides for 12 weeks wages during
maternity plus paid leaves.
The Payment of Gratuity Act, 1972 provides 15 days wages for each year
of service to employees who have worked for 5 years or more in
organizations with 10 man strength or more.1

1 The constitution of India

Social security system in india

Indias social security system is composed of a number of schemes and
programs spread throughout a variety of laws and regulations. However,
that the government-controlled social security system in India applies to
only a small portion of the population.
Furthermore, the generally accepted concept of the social security system
includes not just an insurance payment of premiums into government funds
(like in China), but also lump sum employer obligations.
Generally, Indias social security schemes cover the following types of
social insurances:
Pension
Health Insurance and Medical
Maternity
Gratuity
Disability

While a great deal of the Indian population is in the unorganized sector and
does not have an opportunity to participate in each of these schemes,
Indian citizens in the organized sector (which include those employed by
foreign investors) and their employers are entitled to coverage under the
above schemes.
The applicability of mandatory contributions to social insurances is varied.
Some of the social insurances require employer contributions from all
companies, some from companies with ten or more employees, and some
from companies with twenty or more employees .

http://workspace.unpan.org/sites/Internet/Docum
ents/UNPAN92408.pdf
http://www.india-briefing.com/news/introductionsocial-security-system-india-6014.html/
http://mrunal.org/2012/07/economy-socialsecurity-epfo.html
https://www.ssa.gov/policy/docs/ssb/v16n5/v16n5
p11.pdf
https://www.ssa.gov/policy/docs/ssb/v16n5/v16n5
p11.pdf
http://www.thehindu.com/news/national/howeffective-are-social-security-and-welfare-inindia/article6823320.ece

Pension

The Employees Provident Fund Organization, under the Ministry of Labor and
Employment, ensures superannuation pension and family pension in case of death
during service. Presently only about 35 million out of a labor force of 400 million
have access to formal social security in the form of old-age income protection. Out
of these 35 million, 26 million workers are members of the Employees Provident
Fund Organization, which comprises private sector workers, civil servants, military
personnel and employees of State Public Sector Undertakings.
The schemes under the Employees Provident Fund Organization apply to
businesses with at least 20 employees. Contributions to the Employees Provident
Fund Scheme are obligatory for both the employer and the employee when the
employee is earning up to INR 6,500 (US$120) per month, and voluntary when the
employee earns more than this amount. If the pay of any employee exceeds this
amount, the contribution payable by the employer will be limited to the amount
payable on the first INR 6,500 (US$120) only. Contributions should be made to the
Employees Provident Fund Organization on an annual basis.
The Employees Provident Fund Organization includes three schemes:
The Employees Provident Fund Scheme, 1952
The Employees Pension Scheme, 1995
The Employees Deposit Linked Insurance Scheme, 1976
The Employees Provident Fund Scheme is contributed to by the employer (1.673.67 percent) and the employee (10-12 percent).

The Employee Pension Scheme is contributed to by the employer (8.33 percent)

and the government (1.16 percent), but not the employee.
Finally, the Employees Deposit Linked Insurance Scheme is contributed to by the
employer (0.5 percent) only.
Four main types of pension (all monthly) are offered:
Pension upon superannuation or disability;
Widows pension for death while in service;
Childrens pension; and
Orphans pension.
In addition, there are separate pension funds for civil servants, workers employed
in coal mines and tea plantations in the State of Assam, and for seamen.

Health insurance and medical

The employees state insurance act, 1948 (EST Act) provides for health care and
cash benefit payments in the case of sickness, maternity and employment injury.
The Act applies to all non-seasonal factories run with power and employing 10 or
more persons and to those factories which run without power and employing 20 or
more persons. The appropriate Government may after notification in the Official

Gazette, extend the provision of the Act to any other establishment or class of
establishments, industrial, commercial, agriculture or otherwise.
Under the Act, cash benefits are administered by the Central Government through
the Employees State Insurance Corporation (ESIC), whereas the State
Governments and Union Territory Administrations are administering medical care.
The employees state insurance corporation (ESIC) is the premier social security
organization in the country. It is the highest policy making and decision taking
authority under the ESI Act and oversees the functioning of the ESI scheme under
the Act. The corporation comprises members representing Central and State
Governments, employers, employees, Parliament and the medical profession.
Union Minister of Labour functions as the Chairman of the Corporation.
A standing committee constituted from among the members of the Corporation
acts as the Executive Body for the administration of the Scheme.
The basic provisions of the Act are : Every factory or establishment to which this Act applies shall
be registered within such time and in such manner as may be specified in the
regulations made in this behalf.

It provided for an integrated need based social insurance scheme that would
protect the interest of workers in contingencies such as sickness, maternity,
temporary or permanent physical disablement, death due to
employment injury resulting in loss of wages or earning capacity.

 It also provided for six social security benefits: Medical Benefit

Sickness Benefit (SB)
Maternity Benefit (MB)
Disablement Benefit
Dependants' Benefit(DB)
Funeral Expenses

http://www.archive.india.gov.in/business/legal_as
pects/employees_insuranceact.php

Maternity Benefit
Every woman shall be entitled to, and her employer shall be liable for, the
payment of maternity benefit, which is the amount payable to her at the rate of
the average daily wage for the period of her actual absence.

Period For Which Benefit Allowed

The maximum period for which any woman shall be entitled to maternity
benefit shall be 12 weeks in all whether taken before or after childbirth.
However she cannot take more than six weeks before her expected delivery.

Prior to the amendment of 1989, a woman employee could not avail of the six
weeks leave preceding the date of her delivery; she was entitled to only six
weeks leave following the day of her delivery. However, by the above
amendment, the position has changed. Now, in case a woman employee does
not avail of six weeks leave preceding the date of her delivery, she can avail of
that leave following her delivery, provided the total leave period, i.e. preceding
and following the day of her delivery does not exceed 12 weeks.
Who is Entitled to Maternity Benefit
1. Every woman employee, whether employed directly or through a contractor,
who has actually worked in the establishment for a period of at least 80 days
during the 12 months immediately preceding the date of her expected
delivery, is entitled to receive maternity benefit.
2. The qualifying period of 80 days shall not apply to a woman who has
immigrated into the State of Assam and was pregnant at the time of
immigration.
3. For calculating the number of days on which a woman has actually worked
during the preceding 12 months, the days on which she has been laid off or
was on holidays with wages shall also be counted.
4. There is neither a wage ceiling for coverage under the Act nor there is any
restriction as regards the type of work a woman is engaged in.

Restriction on Employment of Pregnant Women

1. No employer should knowingly employ a woman during the period of 6
weeks immediately following the day of her delivery or miscarriage or
medical termination of pregnancy. Besides, no woman should work in any
establishment during the said period of 6 weeks.
2. Further, the employer should not require a pregnant woman employee to do
an arduous work involving long hours of standing or any work which is
likely to interfere with her pregnancy or cause miscarriage or adversely
affect her health, during the period of 1 month preceding the period of 6
weeks before the date of her expected delivery, and any period during the
said period of 6 weeks for which she does not avail of the leave.2

Disability
The Persons with Disability (Equal Opportunities, Protection of Rights and Full
Participation) Act of 1995 brought into sharp focus the States responsibility to
empower the disabled with equal opportunities, protection of rights and equal
participation in the development process of the nation. It clearly lays down that
education and employment opportunities must be created for the disabled by
providing 3 per cent reservation; stipulates the creation of barrier-free access to
public places and public transport; has provision of preventive social security
2 Maternity benefit act, 1961

measures such as pre-natal and post-natal care for the mother and child;
mentions social security provisions such as unemployment allowance and
insurance; and supports the right of disabled people to lead independent lives3

Gratuity

The Payment of Gratuity Act 1972 is a social security enactment. An Act to

provide for a scheme for the payment of gratuity to employees engaged in
factories, mines, oilfields, plantations, ports, Railway companies, shops or other
establishments[i]. The significance of this legislation lies in the acceptance of
the principle of gratuity as a compulsory statutory retiral benefit.[ii] The Act
accepts, in principle, compulsory payment of gratuity as a social security
measure to wage earning population in industries, factories and establishments.
Thus, the main purpose and concept of gratuity is to help the workman after
retirement, whether retirement is a result of the rules of superannuation, or
physical disablement or impairment of vital part of the body. Thus, it is a sort of
financial assistance to tide over post retiral hardships and inconveniences.[iii] It
is derived from the word gratuitous, which means gift or present.
3Social security and disabled people in india, Disability news and information service,
http://dnis.org/print_features.php?features_id=115 (last accessed on sep 18)

However, having being enacted as a social security form, it ceases to retain the
concept of a gift but it has to be seen as a social obligation by an employer
towards his employee. Gratuity shall be payable to an employee on the
termination of his employment after he has rendered continuous service for not
less than five years,(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement(five year service not required) due to accident or
disease
In the case of death of the employee, gratuity payable to him shall be paid to his
nominee or, if no nomination has been made, to his heirs, and where any such
nominees or heirs is a minor, the share of such minor shall be deposited with the
controlling authority (i.e. government officer) who shall invest the same for the
benefit of such minor in such bank or other financial institution, as may be
prescribed, until such minor attains majority[iv]. In computing the gratuity
payable to an employee who is re-employed, after his disablement, on reduced
wages, his wages for the period preceding his disablement, shall be taken to be
the wages received by him during that period, and his wages for the period
subsequent to his disablement shall be taken to be the wages as so reduced.4

Social Security Schemes By Government of India

4 Prachi agrawal, payment of gratuity act: a critical analysis.
http://www.lawctopus.com/academike/payment-gratuity/ (last accessed on sept 18)

Pradhan Mantri Atal Pension Yojana

the Indian government is striving hard to make life of the old
people much easier and convenient by supporting them
financially. Introduction to the ATAL PENSION YOJANA is one
such leap towards the betterment of the elderly people. This
welfare scheme involves providing income security to the poor
who are workin in the unorganized sector. The plan includes
encouraging them to save enough funds before they retire. No
doubt, this would boost their financial confidence and would
support them in old age when they actually need it the most.
5

Pradhan Mantri Jeevan Jyoti Beema Yojana

This scheme offers a renewable insurance coverage of rs 2 lakh
with merely a premium of 330. Any Indian resident inside age
bracket of 18 to five decades is eligible to avail the scheme,
5 Pradhan mantri atal pension yojana, http://www.pradhanmantriyojana.co.in/atalpension-yojana-apy/ (last accessed on sept 18)

provided she or he has a saving banking account with which

the scheme can be attached.
The scheme covers death on account of any reasons. The main
administrator of the scheme could be life insurance corporation
in addition to hardly any other insurance providerswho are able
to give similar product beneath the scheme. 6

Suraksha Beema Yojana

Pradhan mantra suraksha beema yojana targets social security
through ensuring accidental deaths and partial permanent
disabilities. A large number of population on india lives in rural
areas and these people do not have access to insurance
schemes. PMSBY is an initiative to cater to population in such a
way that would enable them to enjoy the insurance benefits at
minimum contributions.
In order to avail the scheme in India, the subscriber is required
to pay just re 12 per year and enjoy a carefree insured life upto
rs 2 lakhs insurance cover. One of the best thing about these
social security schemes is that they require an insignificant
level of paperwork and this leverage has been provided
considering the fact that a large number of people livin in rural

6 Pradhan mantrI jeevan jyoti yojana, http://www.pradhanmantriyojana.co.in/pmjeevan-jyoti-bima-scheme-pmjjby/ (last accessed on sept 18)

areas do not have all the validation documents available with

them.7

Social security: the way ahead

The challenges in Social Security are increasing day by day. The fast
paced globalization and liberalization has created acute stress in both
rural and urban communities, hence tackling both at the same time is
difficult of the government agencies. National pension schemes and
yojnas have been proven to be quite effective in saving and
investments, however the nature of labor supply, international
competitiveness, and sustainability of development remains a cause of
concern. Therefore undertaking any macroeconomic schemes or
policy, the issues of labor supply and international competition must
be addressed.
It is time that we understand the fact that, playing along with the
modernisation and evolving schemes with its context will help sustain
families. The large migration that we have witnessed in the past, has
proved that the government schemes provide little support. Thus there
is absolute need today for schemes that fulfil the needs of a family that
is in transition. There is also the need to support the groups that have
7 Pradhan mantrI yojana schemes http://www.pradhanmantriyojana.co.in/ (last
accessed on sept 18)

been marginalised in this process. The Government of India is

implementing large scale schemes such as the VRS (Voluntary
Retirement Scheme), which is popularly referred as the golden
handshake. No matter how good the handshake be, the VRS came
into heavy criticism after few days of its launch. Criticism from all
corners turned this scheme into a heated debate. Hundreds not
thousands are being displaced from their communities due to large
and small construction of dams/ infrastructure/MNCs. There is no
provision of Rehabilitation and Resettlement.

Conclusion
Today, only 0.2% of the entire GDP is allocated for Social Security. Out
of this allocation most of the resources do not reach the concerned
locality or community. Although the government has enforced many
laws and legislation for the vulnerable communities, only 10% of these
laws are enforced in the organised sector. There is a huge gap in the
implementation and planning of policies. Repetitive exploitation of
women and children are taking place in our communities. It is our
responsibility to ensure that every child born regardless to the
communities, must be socially secure and adequate resources are
provided to the new borns family from time to time. Every individual
has a right to be happy and no one, irrespective of its communities
should die in hunger and fear. The social safety nets are designed to

protect every member of the community and unlike many countries,

India has yet not realized the dream of a socially secure society.