Pradhan Mantri Shram-Yogi Maandhan: A mega pension scheme to cover workers in India’s unorganised sector

A look at the Pradhan Mantri Shram-Yogi Maandhan scheme declared in the Interim Budget 2019 that promises to provide retirement benefits to India’s huge unorganised labour workforce on a contributory basis.

radhan Mantri Shram-Yogi Maandhan: A mega pension scheme to cover workers in India’s unorganised sector

As is typical of most pre-election Budgets, the Interim Budget of 2019 announced a massive benefit scheme targeted at a major section of the Indian society. India’s unorganised sector, which includes anything from rag-pickers and rickshaw pullers to bidi-makers and daily labourers, will be the beneficiary of what is arguably the world’s largest pension scheme. 

The Pradhan Mantri Shram-Yogi Maandhan (PMSYM) is designed to offer a pension of Rs 3,000 per month to anyone over the age of 60 from the unorganised sector. It will include workers who have a monthly income of up to Rs 15,000. 

An unorganised worker joining the scheme at the age of 18 will have to contribute Rs 55 every month, while a worker joining at the age of 29 will have to contribute Rs 100. This will be matched by the government with an equal contribution. 

Related: Retirement planning for pros: National Pension Scheme 

Over 90% of India’s workforce is engaged in the unorganised sector and they contribute as much as 50% of the GDP. The PMSYM scheme has been welcomed because it promises to provide social security to a sizeable section of the country’s workforce and it will also generate a large amount in contribution.
At the same time, the scheme has been criticised as a last-ditch effort to woo voters, while the Budget in general has been dismissed for not addressing employment generation, increasing public investment, or improving the financial health of people. 

Apart from this scheme, the budget made big allocations towards the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and Pradhan Mantri Gram Sadak Yojana (PMGSY).

Related: Avoid these mistakes when calculating your retirement corpus 

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What is Pradhan Mantri Shram-Yogi Maandhan?

PMSYM is a scheme aimed to offer financial security to people who have no economic backup as they are generally not part of any pension scheme. It will allow workers from the unorganised sector to open pension accounts and deposit money in it till the age of 60. Anyone aged 18 or above can join the scheme, provided their monthly income is less than Rs 15,000. 

The Interim Budget has set aside an amount of Rs 500 crore for this scheme and it is expected to provide support to over 10 crore workers from the unorganised sector.

Why does the unorganised sector need this scheme?

Workers in the unorganised sector, particularly those earning a monthly income of less than Rs 15,000, do not fall under any pension scheme. These are the people who earn daily wages and the saving habit is generally not ingrained into them. Those earning above Rs 15,000 are eligible under the Employee Provident Fund (EPF) scheme, so PMSYM will take care of the people who are left out of the EPF bracket. 

Related: How well are you planning your retirement? Take this quiz to find out 

What are the major issues this budget didn’t address?

It was noted that the Budget did not directly address the issue of the ‘45-year-high’ unemployment rate, nor did it suggest any organised and structured approach towards employment generation. The government was criticised for not being able to meet the fiscal deficit target for 2018-19, as the current account deficit stands at 2.5%. It is felt that the allocations on welfare have not been complemented by allocations on public investments. 

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