Report Card on India's Fiscal Health (Sum's take)

Though I am no where close to being an economist still reading business dailies, and keeping myself abreast of my health and India's health there are certainly some fiscal slippages of a government which is living beyond its means.

1. High fiscal deficit. India's gross fiscal deficit is already one of highest in the world and its getting bigger and bigger. The biggest reasons being S.U.B.S.I.D.I.E.S. (oild, fertilizer etc etc), babus sixth pay commission (its a different matter the jawans and III and IV category employees still gets peanuts), higer wages, farm loan waiver (increased later on the insistence of Rahul baba) and significant duty and excise cuts on account of reigning in inflation. High fiscal deficit will increase borrowing and keep interest rates high.

2. PC and his successors will be forced to reduce public borrowing and curb public investments to keep fiscal deficit within manageable limits. Curbing public investment will have an adverse effect on a boyant economy where infrastructure in lacking and need big thrust by public investment from the government.

3. The amount spent on account of oil and fetilizer subsidy is not meeting the desired objective of helping the poor by keeping the prices low. Rather the benefit of oil subsidy is enjoyed by the lower and higer strata and fertilizer subsidy has in no way reduced farmer suicides or curbed inequalities in the farming sector. The subsidies if reduced the amount can be spent on improving the education, medical and social infrastructure and channelised for generating employment opportunities for the poor which will help India grow much more rapidly. Imagine India's growth story if poor get the purchasing power. The composition of spending is undesirbale. There are certain transfers meant for the lower strata misused and enjoyed by the higher starata.

4. High fiscal deficit has left no room for any maneauverability with the Government on acoount of sudden and uncertain events like oil and commodity price rise. The cushion is just not available anymore.

Given the large negative consequences for the economy the Government must restraint spending pressures and reign in the deficit, without which the hard earned gains of revent years - low government borrowing, disciplined spending, lower interest rates will be lost. Its time for FM and PM to act and bring a successor to Fiscal Responsibility and Budget Management Act.

Sahara case: Battle over big deposits

(This is what Sahara deposits ka panga is all about.......)

No one reading this story has ever possibly kept money with Sahara. It is unlikely that you will know anyone who has opened an account to save through schemes called Sahara Minor, Sahara Super or Sahara MIS. However, these deposit schemes, where the instalment to pay could be as low as one rupee a day, are sold in smaller towns and villages among a clientele of small shopkeepers, fruit vendors, auto rickshaw drivers and workers. An army of agents hired by Sahara India Financial Corporation collects the money to keep the show going. The story would have been simpler if it ended here. But it didn’t. The Reserve Bank of India, which regulates Sahara, has questioned the way the company goes about doing its business. The central bank, which has sweeping powers to regulate banks and finance firms, feels that these small depositors, by their nature being unorganised, are at the “mercy of Sahara and its agents”. Given the nature of these small depositors, there are bound to be irregular accounts due to failure to pay instalments in time. In such cases of non-payment, Sahara ends up paying less than the minimum rate of interest under RBI regulations. For instance, in Sahara 4DS — one of the schemes of the company where the daily deposit amount ranges from Re 1 to Rs 28 — the interest payable to the depositor is 3% less than the applicable rate at that stage if the company receives one-third of the total principal amount. In technical parlance, it’s called “liquidated damages”. Interestingly, there are no complaints from the 4.25 crore Sahara depositors — at least, the regulator has made no mention of any. Do these depositors prefer security to higher returns? RBI, nonetheless, has maintained that “the absence of any complaints does not imply that there is no prejudice to such depositors”. Indeed in a synopsis of the special leave petition filed before the apex court, the regulator has said, “.. the character of the depositors being unorganised and small and the deposits being collected on a daily basis from them, such depositors are unable to know the complexities of collection, the method of payment of interest to them and their own rights, unlike large depositors.” Perhaps, the central bank’s stance emanates from the large number of such “irregular accounts” where depositors have failed to pay instalments in time. According to RBI’s findings, these irregular accounts of small depositors form over 73% of the total number of accounts. These accounts have suffered liquidated damages, and total deposits in such accounts is well over Rs 7,000 crore. Besides, there are unclaimed deposits, which was more than Rs 500 crore as per the company’s statutory audit. (However, it may be mentioned that irregular accounts are not unusual in recurring deposit schemes, and the 73% figure perhaps includes even those depositors who have missed payment once). Till now RBI, whenever it has come down heavily on a finance company, has done so because of the latter’s failure to pay depositors. This is possibly the first time when the central bank has put a question mark on the way a finance company runs its shop. Besides, Sahara is not a non-banking finance company (NBFC) which faces severe restrictions on the quantum of deposits they can raise Sahara is a residuary non-banking company (RNBC) which has no cap on the total public deposit it can mobilise. But unlike NBFCs, RNBCs are required to invest the entire money in directed securities like government bonds. Earlier, RNBCs had the discretion to invest 20% of the money, but this limit has been whittled down to zero. Sahara, which had invested in its real estate business and some of its sister concerns under the discretionary headroom, is yet to exit these investments, and the shortfall is around Rs 1,000 crore. While Sahara is taking longer than what RBI would like it to in converting the investment portfolio into 100% directed securities, these matters could be technicalities compared to a more fundamental question that crops up. Even though the entire money (or a predominant portion of it) is parked in liquid, low-risk assets and RNBCs have to maintain a certain level of capital adequacy, RBI may have some discomfort in regulating an entity with a relatively low equity base managing a deposit outstanding of Rs 18,000 crore. But why did RBI allow Sahara to grow so fast? In the mid ‘90s, RBI had not only laid down the dos and don’ts for Peerless, which was then the biggest RNBC, but also revamped the company’s board with professional directors. If RBI is as concerned as it appears from its recent actions and allegations, the regulator should have stepped in long ago. Under the present circumstances, Sahara is likely to ask for more time from the regulator for scaling down its business. But, when Sahara supremo Subrata Roy and his trusted lieutenant for many years Pallav Kumar Agarwal, the executive director at SIFCL, meets RBI deputy governor Vittal Leeladhar on June 12, they may also have to defend the way they do business. If the regulator sticks to its stand, chances are that this could well turn out into a protracted legal tussle.

(Courtsey - Economic Times)

Fly away Peter, fly away Paul

(An article in Economic Times on decision of the government to allow private airports in India)

Remember the old nursery rhyme which made little sense to us as kids but which we loved to sing because it had so much punch and we could act it out.

Two little dicky birds sitting on a wall, One named Peter, one named Paul, Fly Away Peter, Fly away Paul, Come Back Peter, Come Back Paul. The innocuous news item that the Union cabinet had given its clearance to the aviation ministry’s proposal to allow private parties to have their own airports and helipads, for their own exclusive use, and thus, as a consequence, not have to use public airports, completes the story that India’s Super Elite have finally seceded from the country. As practical as the proposal may appear, as convincing as its back-of-envelope calculations may suggest, the policy is deeply flawed, both morally and politically. It is yet another illustration that our policy community, at the highest levels, has succumbed to a flawed positivist mindset that only valorises the comfort of the wealthy. What is good for them is good for the country. This is in error. One needs only to look at Amartya Sen’s book Ethics and Economics, and the global debates in the area on normative concerns of economics, to know how flawed such thinking is. And yet it drives our policy-making as if the larger concerns of justice, and community solidarity and fraternity are of little relevance. This is a mindset that needs to be challenged and the innocuous news item, and the nursery rhyme, will help me do so. Let me elaborate. Three basic arguments have been forwarded for private airports. The first concerns simple pragmatics. It will reduce congestion at a time when our airports are getting overcrowded and since private planes take longer to land, by moving them out we will save landing time of the other aircraft. The second relates to safety. The aviation authorities will ensure that these airports will maintain the highest safety standards and so, for the flying public, there is no cause for anxiety. The third is a version of ‘he who pays the piper calls the tune’. As long as they pay for it they can have it. When seen from the perspective of the super elite these are sound reasons. Since they will have saved time and discomfort, they can get back to the business of generating wealth. This, as the argument goes, is good for the country. But is it? Are things so straightforward? When seen from a host of other perspectives the policy seems perverse. Take the secessionist argument which holds that the policy encourages the super-elite to live life in a bubble. From the helipad at the top of the corporate headquarters, to another helipad in the factory complex, to perhaps a private airport for a journey to Delhi, the captains of industry can journey across the country without having to meet, or rub shoulders with, or even see the ordinary Indian, let alone experience the minimal existential reflections on the lives of those who live in the slums they have to drive through on their way to the airport. Those people, in many cases, might be their own workers. They will thus never know the possible causes that have reduced to a life of indignity those who beg at red-light crossings, or the conditions of the villagers who have to walk for miles for water, or the anxieties of our rural youth as they search for a space between the rural and urban. The helipad has airbrushed the poor Indian from the lives of our super-elite. They can now sit in oak-panelled boardrooms as they plan India’s growth story without the smells and sounds and colours of India. The Mahatma’s train journey has no lesson for them nor does the more recent yatras of Rahul Gandhi. Why subject them to a little existential angst? How can they script India’s rise if they have to face a little discomfort at a public airport? So not only are India’s poor being airbrushed from the lives of our super rich, but also the aspiring middle class in ill-fitting jeans and cheap French perfumes as they wait for their flights in pursuit of the next sales target or the next LTC. The middle classes, the foot soldiers of Indian industry, are also a nuisance. So, who do the super-elite meet? People like themselves only. The faceless lackeys, who make it possible, fade into the wall paper. This is bad not just for Indian democracy, because we will have a class of very powerful people who have lived very insulated lives, but also for them since they will have lost access to the diversity of India and life itself. And once this is permitted it will produce a cascading ‘me too’ trend. From the ‘biggies’ of industry the policy will produce similar aspirations among the ‘wannabes’ of the corporate world. Just look at the 176% growth of in the luxury car segment in January and February 2008, as compared to the same period last year, and the number of Indians queuing up to purchase a residence in Palazzo Versace in Dubai, to get a sense of the magnitude of this ‘me too’ phenomenon. And if corporate India can have private airports then why not the political class? And the senior bureaucracy? Surely their comfort and time is also important? So what began with private housing enclaves, then moving on to private schools, then private hospitals, has now extended to private airports. A life in a bubble. And for leisure, it’s the yachts in Goa! If this is not secession, what is? There is another important concern. Private airports will require a lot of land. The country has just witnessed political movements on the SEZ policy requiring the government to take corrective measures and in some cases reverse its decisions. Again the poor farmer will have to give up prime land with the Land Acquisition Act being used to get (let me get it right) private land for a public purpose for a private airport. This is perverse. Taking land from the poor and giving it to the rich for the benefit of the poor! Why not just improve our public airports so that all air travellers can benefit? A little discomfort will not hurt the super-elite too much. And it will also make flying, for us poor sods, a bit more exciting to see our icons in the same security queue as us. Oh the nursery rhyme, I forgot. The new policy wants to stop at the third line of the rhyme: ‘fly away Peter, fly away Paul’. I want to stop at the fourth ‘come back Peter, come back Paul’.

Licensing of Travel Agents

(Sum's take on the embarrassment of being called a Travel Agent and the need for TA licencing)

What's the first thing that comes to your mind the moment you hear the word "Travel Agent". Sounds like a childhood game but the word Travel Agent may bring images of a agent selling bus tickets, or a agent sitting in a rickety office selling air tickets and train tickets, worst still the initial memories may be of a travel agent who dupes people on pretext of taking and settling them abroad. Newspapers these days are full of news about a travel agent duping people on pretext of taking them to green pastures in western countries. Its not uncommon to read about touts often being referred as travel agents. How can a person with no office and business of travel can be classified as a travel agent if he is caught selling fake rail tickets or making duplicate passports or sending people abroad illegally (remember your morning newspapers say " Travel Agent dupes people of millions on pretext of sending them abroad" or "Travel agent caught selling fake tickets")

Being a travel agent myself for the last ten years, often I am all at see when I have to introduce myself.. The first glimpse of the person to whom I am introduced as a travel agent is a big question mark in itself and it is profoundly followed by a volley of questions like..."so you send people abroad", "so do you sell air tickets". Being professionally qualified I often have to be a speaking company profile of my company in such circumstances and relate and give some references to convince the person of my status as a genuine and real travel agent and not a tout who are often referred to as travel agents.

Call it a occupational hazard, but the travel agents have to find words better words like travel consultants, travel management company, travel advisors etc to introduce themselves. The vagaries of a travel agent's tale are long and diversified.

With no licensing in place for the travel agents in India everyone including a bus operator, a passsport submission agent, a person who book rail tickets, a person who gets visas (legally or illegally), a person sitting in a STD shop selling air tickets as his favourite passtime, anyone and everyone would call themselves a travel agent. They practically leave no room for a real travel agent and the later often suffer from low self esteem if called a travel agent.

Travel and tourism is the sunrise sector of the economy and generates maximum employment and enterpeneurship opportunities. Government too needs to see the sector in general and travel and tour operators in particular as harbingers of growth and put in place a system of licencing to distinguih between different types of travel agents.

Wikipidea describes a travel agency as a business that sells travel related products and services, particularly package tours, to end-user customers on behalf of third party travel suppliers, such as airlines, hotels, tour companies, and cruise lines. In addition to dealing with ordinary tourists, most travel agents have a special department devoted to travel arrangements for business travelers, while some agencies specialize in commercial and business travelers. Some agencies also serve as general service agents for foreign travel companies in different countries.

Not half of those individuals and companies using the word travel agent would be able to justify the above definition. I am certianly not against any of these companies using this name and status of a travel agent , infact I support any form of enterpeneurship, which I feel is a better way of economic freedom and growth than any other form of employment. Government needs to come out with a system of licencing wherein each category shoulds be spelt out seperately. Air Ticketing agent, railway ticketing agent, passport agent, visa agent, bus operators, immigration and student visa agents, hotel booking agents should be classified as sperate categories and only those who qualify on a minimum of three or more counts out of the above should qualify themselves to be called as a Travel Agent. The licensing should take into consideration parameters like professional qualification, experience, affiliations, recognitions and the range of services provided in the travel and tourism sector.

Travel Agent in bigger and mature socities are more saught after than doctors and CA's as only a good and well qualified travel agent can procure the best deals, give sound advise and generate savings for his clients. Travel Agents are a rare community who work under extreme pressure and time bound situations to deliver a pleasure holiday or a well crafted business trip or memorable family holidays or romantic honeymoons. Home based travel agency, individual travel agents, travel counsellors, are some of the concepts which can provide an imeteus to employment opportunities in the travel and tourism sector through enterpeneurship.

A system of licensing will more of less solve the problem of human trafikking and keep illegal immigration under check. The embassies infested with this problem will vouch for such an idea of licencing and the government (especially the Lok Bhalaia party) will have more of its time consentrating on its core business of politics than helping the people who suffered at the hands of the "Travel Agents".

Sum @ Langkawi .......

(Who Dares Wins......)
all key people in Sum's life are crabs'





(Thinking process......??)






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(The smart photographer.....)

India's Gas Pipelines Dreams

(Mani Shankar Iyer's dream project of Iran-Pak-India Gas Pipeline could not hold stream with subsequent minister and it is now more or less shelved in favour of Turkmenistan - Afghan - Pak- India gas pipe line citing reasons for the IPI pipeline to be laid in a dangerous and uncertain terrain than the one now preffered - TAPI)

India's decision to join the Turkmenistan pipeline project which is more hazardous than the Iranian channel is puzzling.

Playing the Great Game calls for grit, sound calculations and a determination to win at all costs. More so, when spiralling energy prices make a mockery of energy security for countries that are heavily dependent on imports. India is. It already imports 70 of its energy requirements and with the economy growing at approximately eight percent, the figure is expected to increase to as much as 90 percent in the next two decades. Yet, India plays the energy game with a strange mixture of pusillanimity and a bravado that verges on the imprudent.

Nothing exemplifies this better than two major initiatives India took recently. First, it signed up for the Turkmenistan gas pipeline after watching from the sidelines for well over a decade and resisting all inducements to join it, even the blandishments of the US. Then, within days it went out of its way to lionise Iranian President Mahmoud Ahmedinejad during a stopover in Delhi, making it appear that the hoarier Iran-Pakistan India (IPI) pipeline was back on the agenda. But only seemingly so since the government has been sending out clear signals thereafter that it considers the IPI pipeline too risky at this juncture.

Far more significant is India's decision to throw its weight behind the Turkmenistan pipeline that is plagued by a host of uncertainties, not least the adequacy of supplies. The 1,680-km line that will snake its way from the Dauletabad gas field in the central Asian country, cut across Afghanistan and Pakistan, taking in Herat, Kandahar and Multan before reaching Fazilka on the Indian border. Called TAPI as an acronym for the names of the countries it crisscrosses, this pipeline is better known in the West as the Trans Afghan Pipeline because close to half its length (830 km) lies in war-torn Afghanistan; just 170 km of this audacious venture will lie in Turkmenistan.

This is undoubtedly a pipeline that will call for more than the usual guts demanded of those who play the Great Game. TAPI, much more than IPI, straddles the most volatile region in the world. About 47,000 troops, primarily US and British, are fighting the Taliban forces in Afghanistan where an increasing number of suicide bombings have added to the mayhem. The latest reports say the US intends to increase its troops and firepower in the embattled country.
It was surprising, therefore, that Delhi plumped for the TAPI project with very little discussion on its merits. Announcing the agreement, Minister of State for Petroleum and Natural Gas Dinsha Patel gave some sketchy details of what India expects to gain from the $ 7.6 billion pipeline—still an estimate—that is expected to bring gas to India from 2014. Patel says TAPI is projected to supply 90 mmscmd (million standard cubic meters daily) of gas, of which Afghanistan will get 5 mmscmd during the first two years and 14 mmscmd from the third year onwards. The rest is to be shared equally between Pakistan and India. That's roughly around 30 billion cubic meters (bcm) of gas annually.

The agreement came three weeks after the ministry signed a memorandum of understanding with its Turkmenistan counterpart in Ashgabat during the visit of Vice President Hamid Ansari to Turkmenistan in April. According to one view, it was an indication that India was ready to take the plunge on an alternative to the IPI pipeline, while petroleum ministry sources say it is not a case of either/or but a question of widening the options.

What then are the misgivings on TAPI? Turkmenistan is one of the great repositories of natural gas with an estimated of 10-14 trillion cubic meters (tcm) of reserves. But the reserves are not certified and it was only in January that the country's new President Gurbanguly Berdymukhamedov, who has been pushing gas projects with much vigour since he took over six months ago, sought an independent audit from a British firm. Under discussion since 1995, the project has seen a lot of it original backers like the US major Unocal and Russia's Gazprom pull out although the US government and the Asian Development Bank are pushing for it. Of late, Turkmenistan has been involved in a flurry of deals that put a huge question mark over supplies to the Afghan pipeline. Russia has a virtual monopoly over exports from Turkmenistan with Gazprom allowed to take up to 50 bcm of gas annually for another two decades. China has been promised 30 bcm from 2009 and Iran 8 bcm. Berdymukhamedov is also reported to have signed another 10 bcm to the European Union, bringing its projected gas exports to over 100bcm annually. That, say energy analysts, is a huge figure considering that Turkmenistan's reserves are yet to be certified.

India's petroleum ministry has no clear idea of Turkmenistan's potential but points out that gas exports are expected to begin only in 2014 before which a realistic assessment will emerge. That's fair enough since the energy game is all about tying up potential supplies before the competition does. In this case, China has once again beaten India to the draw since Turkmenistan supplies are scheduled to start next year.

There are several reasons why India needs to play the Turkmenistan card with circumspection and a great deal of diplomatic finesse. For one, it has to be careful of the sensitivities of Russia which is a strategic partner on nuclear energy and oil. Moscow is determined to discourage others from tapping into Turkmenistan gas and has been regularly raising doubts about the country's claims on its reserves. If there are indeed enough supplies, Russia would like, as far as possible, to control the market. For another, it could find itself trapped into a costly deal since Turkmenistan's objective in striking new export deals is to secure a more remunerative price for its gas which is sold at very low rates to Russia.

Russia has also been a strong supporter of the IPI pipeline and is not likely to view with favour India opting for TAPI in preference to IPI. From all accounts, the latter has been slotted as high-risk by India because of the potential threat of the US attacking Iran. There is also the question of unrest in Baluchistan where existing pipelines have been blown up by tribal insurgents.
Commercial reasons are ostensibly the major stumbling block on the IPI pipeline with India and Pakistan still squabbling over the transit fee. India is asking Pakistan to lower the transit fee to 15 cents per million British thermal units (mmBtu) from the 42 cents it is demanding in addition to a flat payment of $200 million a year that Pakistan is seeking for the security and maintenance of the pipeline.

While India blows hot and cold on the project, Iran and Pakistan are set to meet next week for talks to finalise the signing of the gas sales purchase agreement although analysts fear this could be delayed owing to the political uncertainty in the wake of the resignation of Petroleum Minister Khawaja Asif. As such, the problems of coalition politics in Pakistan might give India breathing space on the pipeline.

For India, it is a choice between a rock and a hard place. Both pipelines traverse some of the most hazardous combat zones with little hope of governments being able to provide foolproof guarantees of secure supplies. But with gas supplies falling far short of demand and leaving significant power and fertiliser assets stranded for the past three years, it clearly has to take a gamble and hope that its choice will pay off. Will the IPI pipeline prove less risky than the TAPI line? A decision on Iran by the White House along with events unfolding in Afghanistan and Pakistan could soon settle the debate.

(Extract from Business Standard)

Blueprint on pension for the masses

(State pension plan for the poor simplified and exampified by a unique initiative of the Rajasthan government. Time for other states and centre to catch up.)

There are about 137 million low-income workers in India with monthly incomes of up to Rs 3,000, for whom retirement is not an option. In 60 years of independent India we have not yet got round to tackling this. The good news is that some path-breaking work is beginning to take shape. It could be the blueprint for the government to deliver targeted pensions to the poor.

Low-income workers comprise people who are wage labourers, those involved in primary production, street vendors, contract workers, etc. Nearly all of them continue to work till the limbs permit. Over 80 per cent of this population is below 45 years and therefore can benefit significantly if they have a pension scheme that is accessible, inexpensive and well designed.

The Rajasthan government has recently introduced an innovative pension scheme that is targeted at the low-income workers. This is the first scheme of its kind in the country. The state government has identified 20 occupations that serve as a proxy for the poor to roll out the scheme. Using technology and ground level partnerships with worker associations the scheme proposes to target at least 500,000 low- income workers.

For each scheme member the government contributes up to Rs 1,000 per annum to motivate the workers to save for their own retirement and also to ensure that the pensions at the time of retirement are at above poverty levels. A worker who puts in Rs 1,000 per annum gets an equal amount into his pension account from the government.

The benefit is capped at Rs 1,000 per annum for its optimum spread. Therefore, someone who puts in Rs 1,500 also gets Rs 1,000 and someone who is able to contribute only Rs 600 shall benefit by Rs 600. This matching act is an incentive to encourage workers to save up to Rs 1,000. This level of savings requires a worker to save Rs 2.75 per day and there is adequate incentive for even a very poor worker to save. The scheme does not allow early withdrawals, which ensures that the objective is not sacrificed. Other large states are also examining schemes on similar lines, with Madhya Pradesh being one of them.

Co-contributions are unlike just another subsidy. In fact they are not. All tax payers already enjoy similar concession. For instance, if you invest up to Rs 100,000 in specified savings instruments the tax department gives you a tax benefit of Rs 30,000. Just like we who pay taxes get a tax "top-up" for savings under Section 80C, the low-income workers also need similar motivation even though they do not have income to be counted as tax payers.

The result of co-contributions is significant for the retirement savings of a low-income worker. For instance, based on LIC rates, a co-contribution of Rs 1,000 per annum for a worker contributing an equal sum over a period of 25 years results in a monthly pension of Rs 1,275 per month with a simple 3 per cent growth rate in the monthly pension every year.

Outside of state governments, occupation-based groups and grassroots finance institutions are keen to work in delivering pensions to low-income workers. An experiment that Invest India began in SEWA Bank in early 2006 where poor women workers pooled in Rs 50-100 each month to begin saving for their retirement has over 30,000 members, out of which hardly anyone has opted out. These women have individual pension accounts and their savings flow into a portfolio comprising a mix of debt and equity. Since then, UTI AMC has developed many such partnerships in the last two years to deliver long- term savings products to the poor.

In case the government comes forward to co-contribute, it would be feasible to target those who have access to banking and micro finance and/or belong to low-income occupational groups (for example, construction workers, bidi workers, salt workers, fishermen, small dairy workers, etc).
During my interactions with large occupation groups in the country over the past 18 months, the demand for pensions was found to be consistently high. Technology and good product design can be used to overcome the challenges of high transaction costs and widespread coverage.
Data suggest that about 50 million of the above low-income workers are keen to save for their retirement and are willing to co-contribute at least Rs 1,000 per annum. This will cost Rs 5,000 crore per annum or just 0.1 of the GDP.

Even at the dizzying limits of covering all low-income workers the annual bill would be Rs 13,700 crore. That is 0.30 per cent of GDP.

Unlike waiving farm loans, which means penalising those who sweat and toil to ensure repayment, pension co-contribution would be a positive motivation. The funds can be transparently and directly invested in an investment fund and the worker would get the money only at the retirement age. The worker has to invest his own contribution during the working age to benefit from the scheme. Why just Rajasthan? Each state can announce such a scheme. The central government too can participate.

Proxy means using occupation-based groups and grassroots credit groups are one of the ways of ensuring targeted coverage. There is evidence that they can be used for the delivery of retirement savings benefits and low-income workers are keen to save for retirement with or without the benefit of co-contributions.
(with excerpts from the Business Standard)