Today Arun Jaitley, the Finance Minister of the BJP government at the Centre, is at the Life Insurance Corporation of India to launch a new Pension Policy for the elderly with 8% fixed rate of interest on a Policy costing Rs 7.5 lakhs.
The shortcomings of the proposed scheme can be summed up in one word: austerity.
The hidden austerity politics underlying the Pradhan Mantri Vaya Vandana Yojana Pension Policy promoted by the BJP and offered by the Life Insurance Corporation of India policy reference number UIN: 512G311V01 may not be immediately apparent. After all, Central schemes such as this always are promoted as being targeted at "everybody." But on closer inspection one finds that most Indians, who will be limited to one pension per nuclear family under the scheme, will have no way to access this Pension Policy.
According to the National Sample Survey Office of India about 31.4% rural households and 22.4% urban homes were in debt in 2013. The figures were released in 2016. The average cash dues outstanding per household were estimated at Rs. 32,522 and Rs. 84,625 for rural and urban areas respectively, while the average amount of debt per indebted household was Rs. 1.03 lakh and Rs. 3.78 lakh in the rural and urban areas respectively. How then are we supposed to afford the minimum purchase price of Rs. 1.5 lakhs let alone the maximum purchase price of Rs. 7.5 lakhs?
Gross Domestic Savings and Gross Domestic Capital Formation for 2011-2012 in India were just Rs. 15,413 per person in households, Rs. 4957 in the private corporate sector, and Rs. 901 in the public sector. Considering three quarters of Indians earn less than Rs. 5000 per month, these household savings will certainly not be used to buy a Pension Plan. Rather such savings are generally saved in cash for a rainy day.
According to a 2010 report by National Council for Applied Economic research, only 1-3% of savings in households is spent on things such as life insurance or other financial schemes. The rest is in the bank. 3% of savings would be just Rs. 462 per year, nowhere near enough to splash out Rs. 1.5 lakhs on purchasing the new Pension Policy.
Nor will such households be in a position to take a loan for the purchase price of the Pension Policy after three years of participating in the policy. This can be illustrated very simply by taking the case of Bhojpur District. 8% of the population are over 60, a population of 216,000 people. Each pensioner needs to be able to raise Rs. 7.5 lakhs to buy a policy. Assuming one acre of agricultural land is valued at Rs. 3 lakhs each pensioner needs to be able to mortgage 2.5 acres of land. Or supposing we want to organise the pension for all the pensioners through the State Government or through the Gram Panchayats of the District, it means we have to raise a mortgage of Rs. 16,200 crores which means mortgaging all the nearly six lakhs acres of land in the District at a rate of just under Rs. 3 lakhs per acre to buy pensions for all the pensioners. If we were successful at doing this in that case the pensioners of the District could get Rs. 5000 per month for ten years and their Pension Investment Amount of Rs 7.5 lakh back after 10 years. But how are we to organise this? How are State government politicians supposed to be able to convert themselves into financial wizards to come up with a feasible scheme of this kind just to access this money?
Obviously, this illustrates how impossible the current financing system is for pensioners. A better way forward not only for pensioners but for everybody is to transfer the function of creating the national money supply from private commercial and nationalised commercial banks as a source of private profit to themselves, to a public agency – the central bank – as a source of debt-free public revenue to be spent into circulation by the government for public purposes. In that case pensioners would be paid from the public purse and their purchasing power would add to trade and creation of livelihoods in the District and the country.
Basically, yet again, the BJP has announced a Pradhan Mantri scheme with great fanfare that the vast majority of pensioners in India have no chance at all to participate in either now or in any future dominated by a BJP or INC Central Government. Nor as we can see, can any well-meaning State Government do anything to try and buy such pension policies for its pensioners even if it wanted to: legal tender is a matter for the Union, and the Union under both BJP and INC Governments has chosen not to issue enough legal tender for Indians to be able to earn, let alone save. Therefore, we will all be stuck without pensions for the foreseeable future; unless of course we throw out the present Central Government and commit to an ecological and socialist money policy from 2019 onwards.
Anandi Sharan was born in Switzerland, lives in Bangalore, and worked in Araria District in 2016. She mainly writes about India and how we need a better money policy to help agricultural labourers and women especially to adapt to man-made climate change.