Icon Our Work

Age against the machine: The need for a pension revolution in India

01/10/2024

This International Day of Older Persons, we celebrate the contributions of older persons everywhere who continue to fight for their access to social services throughout their lives, namely through social security. In honour of this day, Chhani Bungsut, our Communications Officer, has written a blog championing universal old age pensions in India with a closer look at her home state, Mizoram. In this piece, Chhani highlights the inadequacy of current pension support in Mizoram and proposes a universal old age pension system for India. 

On a languid Tuesday morning in January, the Treasury Office in Aizawl, Mizoram – my home state in Northeast India – was shaken awake by a disgruntled elderly man. Demanding his pension payment, the man brandished a chempui, a machete typically used for farming, threatening the office workers squirming in their flimsy plastic chairs. While everyone walked out unscathed, the police soon arrived and arrested the man.[1] His desperate act, risking arrest for a pension worth a mere INR300 (US$3.60) per month, laid bare the grave challenges facing older people in Mizoram. This incident took social media by storm, provoking discussions about the status of older people in the state and the lack of adequate income support.  

In Mizoram, as in the rest of India, the primary source of income support for older people is the Indira Gandhi National Old Age Pension Scheme (IGNOAPS). This programme, aimed at those aged 60 and above belonging to Below Poverty Line (BPL) households – in other words, the very poorest – forms the backbone of old age support in the state. However, the reality of the scheme falls short of its intention to tackle poverty among older people.

Under IGNOAPS, beneficiaries receive a monthly pension. In Mizoram, this initially amounted to INR600 (US$7) per month – INR500 (US$5.95) from the central government and an additional INR100 (US$1.20) per month from the state – for those aged 80 and above, while those aged 60-79 years received INR300 (US$3.60) per month, with INR200 (US$2.40) from the central government and INR100 (US$1.20) from the state. In the 2024-2025 Mizoram budget, the state government increased its contributions to the monthly old-age pension so that people could receive INR1,000 (US$12) per month, a much-needed addition, yet still targeted only towards those below the poverty line.[2]

The promised increase is a step forward, but it is still a paltry amount. Claiming that India – and Mizoram – are too poor to fund an adequate pension is not a good enough excuse, especially when poorer countries are able to provide higher-value social pensions. Nepal, for example, trails far behind India in terms of its quantifiable wealth yet boasts a much more generous state pension for its older citizens: senior citizens receive NPR4,000 (US$29.80) monthly. In comparative terms – taking into account the wealth of the two countries – the value of the Nepal pension is 27.4 per cent of GDP per capita while it is only 1 per cent in India, making it one of the lowest value pensions in the world. Further, Nepal provides its pension to everyone over 68 years of age, rather than targeting it at the poorest older people.

Returning to Mizoram, regardless of the increased value of the state’s social pension, delays in disbursement are common, leaving vulnerable older people without support, thereby inciting frustration. The poverty-targeted nature of the scheme means many older persons fall through the cracks as many of those living in extreme poverty do not receive their pensions in the first place. While there is not sufficient data from Mizoram, across India, 68 per cent of those who are eligible for the pension are excluded from the scheme, indicating a seriously flawed approach when pensions are poverty-targeted using the BPL card (see Figure 1).

Figure 1 – Targeting effectiveness of the Indira Gandhi Old Age Pension Scheme

Source: Kidd and Athias (2019).

Many who should qualify based on their economic situation struggle to prove their eligibility or obtain the necessary documentation. This creates a system in which older people must navigate a complex and expensive bureaucratic process to prove their poverty, not only an administratively demanding task, but more importantly, a process that strips away their dignity.

These challenges point to the need for a more comprehensive and locally tailored approach to old age social security in Mizoram and India at large. A universal old age pension similar to Nepal’s presents a compelling alternative: it is administratively cheaper, more comprehensive, and dignified.

Is India ready for a universal old age pension?

Contrary to common belief, India is not a stranger to universal old age pensions. In 2019, Bihar became the first Indian state to offer universal old age pension coverage. Called the Mukhyamantri Vridhjan Pension Yojna, the programme provides a monthly pension of INR400 (US$4.80) to all residents between 60-79 years and INR500 (US$5.95) for those aged 80 and above, as long as they do not receive any other form of social pension. Bihar’s pension complements the national scheme which continues to support BPL families.

While an in-depth study is needed to reveal the costs, effects, and sustainability of the programme, Bihar’s momentous decision shows that universal coverage relies on political will more than economic strength.[3] Of course, the value of Bihar’s pension is still far too low but it has, at least, taken the important first step of offering universal coverage.

If India is not ready to take the leap to transform IGNOAPs into a universal programme, perhaps individual state governments can follow the example of Bihar’s government. However, we should not stop there. Recent research by Development Pathways proposes a much more ambitious and impactful approach for India: a universal old age pension of INR2,800 (US$33.50) per month. This stands in stark contrast to India’s current social pension. The difference is not just in amount, but in dignity and quality of life for our elders.

But how can we make this a reality? The answer lies in gradual implementation. Development Pathways’ proposal is for the scheme to grow over time. For instance, the old age pension could begin in 2025 for everyone aged 75 years and above, with the age of eligibility falling to 70 years in 2030 and 65 years in 2035. The level of investment required would be 0.32 per cent of GDP in 2025, rising to 0.54 per cent of GDP by 2035.

This approach is not without precedent. While many paces behind India economically, Nepal’s government took a leap of faith and commenced its universal pension programme in 1995 with an age of eligibility of 75 years, falling to 68 years by 2022. The universality – and popularity – of Nepal’s Old Age Allowance explains the government’s relatively high investment of 1.4 per cent of GDP in the programme, compared to India’s meagre spending of 0.02 per cent on the IGNOAPS.[4] Where there is a will, there is fiscal space.

This gradual expansion allows for fiscal planning and system adjustment while progressively including more older residents. Implementing such a system is projected to reduce poverty among older people (ages 60+) in India by 59.7 per cent, addressing the very issues that drove that desperate man in Mizoram to brandish his chempui.

To bring us back to Mizoram, where my grandparents still live, the new government has avidly touted the importance of respecting older residents, in line with folktales and rhetoric that value their wisdom and contributions throughout their life. While the government currently budgets 0.12 per cent of its Net State Domestic Product for spending on social pensions, increasing the payout from US$12 to US$30 per month for all older people in Mizoram would cost a slightly higher expenditure of 1.13 per cent. This increase in value would mean increased financial security and quality of life for Mizoram’s older persons.

The government can now put its words into action to ensure that all our older residents receive social pensions and live with dignity and comfort, just like they do in the fables passed down through generations.


[1] https://bengvarna.com/post/mz/mizoramnews/0/3869/Chempui+nen+Treasury+luhchilh

[2] https://www.indiatodayne.in/mizoram/story/mizoram-government-to-raise-old-age-pension-893126-2024-02-22

[3] Bihar has consistently announced the lowest Per Capita Net State Domestic Product (NSDP), with Rs 54,383 (US$650) at the end of 2021-22. In comparison, Mizoram reported a per capita income of Rs 1,98,962 (US$2,733) in the same year.

[4] Calculations based on 2023-2024 budget allocation for IGNOAPS divided by India’s total GDP.