Centre’s Old Age Pension Loses Value Due to Inflation

Old Age Pension Latest News

• A government-commissioned study submitted to the Union Ministry of Rural Development has found that the Centre’s old age pension under the National Social Assistance Programme (NSAP) has lost nearly 45% of its real value since 2012 due to inflation.

Introduction

• A recent government-commissioned evaluation has highlighted the growing inadequacy of social security pensions provided under the NSAP. 
• According to the study submitted to the Union Ministry of Rural Development, the Centre’s contribution of Rs 200-500 per month toward pensions for elderly persons, widows, and persons with disabilities has remained unchanged since 2012, resulting in a sharp erosion of its real value due to inflation. 
• The report estimates that inflation has reduced the purchasing power of these pensions by nearly 45%, raising concerns about the effectiveness of India’s social assistance framework in supporting vulnerable populations. 
• The study has recommended introducing an inflation-linked National Floor Pension to ensure minimum financial security across states. 

‹ ›

About the National Social Assistance Programme (NSAP)

• The NSAP is a centrally sponsored social welfare scheme launched in 1995 to provide financial support to vulnerable sections of society living below the poverty line.
• The scheme operates under the Ministry of Rural Development and currently includes five sub-schemes:
  • Indira Gandhi National Old Age Pension Scheme (IGNOAPS) 
  • Indira Gandhi National Widow Pension Scheme (IGNWPS) 
  • Indira Gandhi National Disability Pension Scheme (IGNDPS) 
  • National Family Benefit Scheme (NFBS) 
  • Annapurna Scheme 
• The programme aims to ensure social protection and basic income support for elderly persons, widows, disabled individuals, and economically vulnerable families. 

Existing Pension Structure Under NSAP

• The pension amounts under NSAP were last revised in 2012. At present, the Centre provides:
  • Under IGNOAPS:
    • Rs 200 per month for senior citizens aged 60-79 years 
    • Rs 500 per month for beneficiaries aged 80 years and above 
  • Under IGNWPS:
    • Rs 300 per month for widows aged 40-79 years 
    • Rs 500 per month for widows aged 80 years and above 
  • Under IGNDPS:
  • Rs 300 per month for persons with disabilities aged 18–79 years 
  • Rs 500 per month for persons aged 80 years and above 
• Additionally, under the National Family Benefit Scheme (NFBS), a one-time assistance of Rs 20,000 is provided to families upon the death of the primary breadwinner. 
• Currently, the old age pension scheme reportedly covers more than 221 lakh beneficiaries, while over 67 lakh widows and around 8.8 lakh persons with disabilities receive support under the respective schemes. 

News Summary

• The evaluation report titled “Impact Assessment and Evaluation of the National Social Assistance Program (NSAP)” observed that the pension amounts have not kept pace with rising inflation and consumption expenditure. 
• According to the study:
  • India’s Consumer Price Index (CPI) increased from 100 in 2012 to 191 in 2024 
  • This reflects a cumulative inflation rise of nearly 91% 
  • A pension of Rs 200 in 2012 would need to increase to around Rs 382 to maintain the same purchasing power 
  • Similarly, Rs 500 should have increased to nearly Rs 955 
  • The report further noted that the real value of the pension has effectively declined by nearly 45% due to average annual inflation of around 5% between 2010 and 2024. 
  • Adjusted to current CPI levels, the Rs 200 pension would now need to be approximately Rs 353 merely to preserve its earlier purchasing power. 

Recommendations of the Study

• To address the declining value of social security pensions, the report recommended the introduction of a National Floor Pension (NFP), similar to the National Floor Level Minimum Wage framework. 
• The proposed NFP would:
  • Ensure a minimum pension level is uniform across all states 
  • Be linked to the Consumer Price Index (CPI) 
  • Automatically adjust with inflation 
  • Include annual revisions based on cost-of-living changes 
• The report also recommended that states should provide transparent and uniform top-ups over the central contribution to reduce regional disparities in pension benefits. 

Performance of States Providing Higher Pension Top-Ups

• The study highlighted that states offering higher pension contributions in addition to the Centre’s share demonstrated better social outcomes.
• States such as Andhra Pradesh, Telangana and Haryana were found to have improved income stability and overall well-being among beneficiaries due to larger state-level pension top-ups. 
• This suggests that stronger state support can significantly improve the effectiveness of social assistance programmes and reduce financial vulnerability among the elderly and disadvantaged groups.

Challenges in India’s Social Security Pension System

• Inadequate Pension Amounts: The current pension amounts are insufficient to meet rising living costs, healthcare expenses, and food inflation.
• Absence of Inflation Indexation: Unlike many welfare systems globally, NSAP pensions are not automatically revised according to inflation.
• Interstate Variations: Different states provide varying levels of top-ups, resulting in unequal social protection across India.
• Rising Elderly Population: India’s ageing population is increasing rapidly, creating greater demand for social security and income support systems.

Source: IE | Money Control