Does India’s Pension System Truly Care for Its Elderly? A Broken Promise of the Social Contract?

The idea of a government, as conceptualised through the lens of social contract theory, is simple yet profound. Centuries ago, philosophers like Hobbes, Locke, and Rousseau argued that individuals willingly surrendered some of their freedoms and resources to a collective authority, in exchange for protection, welfare, and order. In modern democracies like India, this implicit contract is renewed every election when citizens choose leaders, not just to govern but to care — to ensure that no one, particularly the vulnerable and aged, is left behind.

But when one closely examines the condition of India’s pension system, especially for those in the unorganised sector, it feels less like a social contract and more like an abdication of duty. The critical question that deserves asking is: if the state exists to safeguard the welfare of its people, what does it mean when an elderly citizen is expected to survive on ₹200 or ₹500 a month? Is this welfare, or a cruel statistical checkbox?

Consider the Atal Pension Yojana (APY), often cited as a flagship scheme for informal workers. It promises pensions ranging from ₹1,000 to ₹5,000 per month for subscribers upon reaching 60. On paper, it seems like a noble initiative. But dig deeper and unsettling realities emerge. An 18-year-old joining the scheme would begin by paying a paltry ₹42 a month to secure ₹1,000 at age 60. At an average inflation rate of 5%, this ₹1,000, four decades later, would be worth just about ₹129 in today’s terms — barely enough for a basic meal in a roadside eatery, let alone a month’s sustenance.

It’s an arithmetic betrayal masquerading as policy.

The inadequacy is even starker when one looks at the Indira Gandhi National Old Age Pension Scheme (IGNOAPS), where the central government’s contribution for those aged between 60-79 is ₹200 per month, and ₹500 for those 80 and above. Even with state government top-ups, the final amount seldom crosses ₹1,000 in most states. To call this an old-age pension is a misnomer; it is, at best, a token gesture. A litre of milk, a few tablets of medicine, and a bus ride — and the month’s pension is gone.

The government's Pradhan Mantri Shram Yogi Maandhan Yojana (PM-SYM) was launched amidst much fanfare in 2019, promising ₹3,000 per month pensions for unorganised sector workers earning ₹15,000 or less. However, as of early 2025, only around 5 million people have enrolled out of a potential 420 million unorganised workers. Awareness, administrative complexities, irregular incomes, and mistrust in long-term state commitments have stifled its reach.

Beyond numbers and policies, this situation reflects a profound philosophical and societal dilemma. India’s rapid economic transformation has led to urbanisation, migration, and the dissolution of traditional joint families that once served as the primary safety net for the elderly. Today, the average migrant labourer in Delhi or Mumbai may have elderly parents living in a distant village in Bihar or Odisha, with no stable income, no family nearby, and a state pension that can’t cover even a week’s expenses.

If governments were formed so that citizens, especially the weak, frail, and voiceless, could live with dignity, then this is a glaring failure. The social contract isn’t just about roads, railways, or digital India projects; it’s about ensuring that in the twilight of one’s life, basic needs like food, medicine, shelter, and warmth are met.

Welfare states in developed economies have grasped this idea better. In countries like Japan, whose demographic structure is alarmingly skewed towards the elderly, pensions are substantial and indexed to inflation. European nations like Germany and Sweden have generous state pension schemes, supplemented by contributory plans and community care systems. Even in the United States, despite its market orientation, the social security system provides about 40% of pre-retirement income to an average retiree — a safety net not left to the mercy of market returns.

In contrast, India’s old-age pension system lacks both adequacy and coverage. A NITI Aayog discussion paper (2022) acknowledged that less than 10% of India’s elderly have access to any form of regular pension. This figure shrinks further if one excludes government retirees and organised sector workers, who are already a minority. The irony is sharp: those most in need of state support are the least likely to receive it.

Inflation is the unspoken predator here. While government pensions remain static or see negligible increments, the cost of living steadily climbs. Healthcare inflation in India averages 6-7% annually, higher than general retail inflation. An elderly individual suffering from hypertension or diabetes might spend ₹1,500-2,000 monthly on medicines alone — several times what a government pension provides.

Moreover, the assumption that families will care for their elders is increasingly outdated. As India’s workforce migrates internally in search of opportunities, and urban housing costs force the rise of nuclear families, elderly parents often remain alone in rural or semi-urban areas. The state must step in where the family cannot. This is not merely an economic imperative but a moral one, deeply embedded in the social contract the state has with its citizens.

What compounds the issue is the design flaw in the schemes themselves. APY offers fixed pensions, unadjusted for inflation. Its sustainability is questionable in a demographic landscape where longevity is increasing. India’s life expectancy has risen from 63 in 2000 to 70.9 in 2023. A pension amount fixed in 2025 would be grossly inadequate by 2040. Policymakers seem fixated on enrollment numbers rather than the quality or sufficiency of the pension itself.

The debate, then, is not whether India has pension schemes — it does, and plenty of them. The real question is whether these schemes can ensure dignity, security, and a modicum of comfort in old age. The answer, sadly, remains no.

Governance is not just about GDP numbers or infrastructure projects; it’s about the lived realities of the most vulnerable. It is time the state remembers its primary obligation under the social contract: to protect those who can no longer protect themselves. This means not just increasing pension amounts but linking them to inflation, simplifying access, integrating health coverage, and actively promoting awareness, particularly in rural areas where digital literacy is low.

The question we must collectively confront is — if a government cannot care for its elderly, the very citizens who once built the nation with their labour and taxes, what legitimacy does it hold as a welfare state?

India must decide whether it wants to be a nation that reveres its aged as living ancestors or relegates them to poverty-stricken anonymity. The time to rebuild this fractured social contract is now.