Return and retirement funds for Indian migrant working women in ECR countries

Abstract

Overseas Indian workers are excluded from access to formal social security and retirement savings schemes available to residents of the 17 ECR countries. They are also excluded from formal pension, provident funds and gratuity schemes normally available to workers in India. No mechanism presently exists to enable and encourage these workers to either save for their old age or have any motivation to come back to India for a return and resettlement. As a consequence, a majority of these overseas Indian workers face the grave risk of poverty when they return to India and become too old to work. On an average, nearly one in every five Indian workers in ECR countries is a woman. Women workers are even more vulnerable to old-age poverty since they enjoy a higher life expectancy than men but are disadvantaged due to relatively lower incomes, shorter work life and interruptions in employment due to childbirth and other family responsibilities. This chapter focuses on the rationale and requirement for such a scheme and provides recommendations to the policymakers towards designing such institutional mechanism that would encourage the target population to voluntarily save for their scheduled return and to also improve their retirement incomes. The chapter argues in favour of using conditional cash transfers (CCTs) mechanism for providing a socioeconomic safety net. Even with needed reforms of formal sector pensions, part of the requirement for retirement income security will need to be met from newer instruments such as the CCTs. CCTs have received considerable attention as instruments for eliciting desirable behaviour on the part of the recipients, minimizing transaction costs and errors in delivery of public services. That the CCT mechanism can be used effectively and efficiently to motivate pension savings in India has been partly demonstrated by states like Rajasthan and Andhra by launching co-contributory pension scheme with the states contributing financially to augment retirement savings of low-income individuals.