59  Social Assistance and Social Insurance: Concept, Distinction, Three Pillars (Insurance · Assistance · Universal), Indian Schemes (NSAP, IGNOAPS, Widow, Disability Pension; ESI; EPF), Funding Models, Coverage Gaps and the Code on Social Security 2020

59.1 Two Roads to Income Security

Social security takes two main routes to deliver income security: social insurance — where workers and employers contribute to a fund that pays benefits when a contingency hits — and social assistance — where the state, financed by general taxation, gives means-tested benefits to those in need without prior contribution. India uses both: contributory ESI / EPF / EPS for the organised sector, and tax-funded NSAP / pensions / Ayushman Bharat for the unorganised and poor. The Code on Social Security 2020 brings both pillars under one umbrella.

59.2 1 · Concept

TipConcepts

Concept	Substance
Social Insurance	Contributory programme; benefits triggered by predefined contingencies (sickness, accident, old age); financed by worker + employer (+ state) contributions
Social Assistance	Non-contributory; state-financed from general revenue; means-tested; targeted at the poor and vulnerable
Universal Services	State-provided services (health, education) regardless of contribution or means

59.3 2 · Distinction Table

TipSocial Insurance vs Social Assistance

Aspect	Social Insurance	Social Assistance
Contribution	Required (worker + employer + sometimes state)	None
Eligibility	Membership and contingency	Means-test, vulnerability
Financing	Contributions accumulated in fund	General taxation
Benefit linkage	Earnings-related or fixed	Flat-rate or minimum
Coverage	Defined population (employees of covered establishments)	Targeted poor / vulnerable
Benefit as right	Right earned through contribution	Discretionary or right under statute
Examples (India)	ESI, EPF, EPS, EDLI	NSAP, IGNOAPS, Widow Pension, Disability Pension

NotePYQ trap — Contribution-vs-tax-finance distinction

The core distinction: social insurance is contributory; social assistance is non-contributory and tax-funded. NTA stems frequently test this difference.

59.4 3 · Historical Evolution

• Bismarck Germany 1883 — Sickness Insurance Act — first social insurance scheme; followed by Accident Insurance (1884) and Old Age Insurance (1889).
• Poor Laws (UK 1601, 1834) — early social assistance.
• Beveridge 1942 — universalist social insurance plus social assistance for those outside.
• Indian colonial period — Workmen’s Compensation Act 1923 (insurance); Government schemes for famine relief (assistance).
• Post-independence: Adarkar Plan 1944; ESI Act 1948; EPF Act 1952.
• Liberalisation era: National Social Assistance Programme (NSAP) 1995.
• Code on Social Security 2020 — both pillars unified.

59.5 4 · Indian Social Insurance Architecture

TipMajor Social Insurance Schemes in India

Scheme	Year	Coverage
Workmen’s / Employees’ Compensation	1923	Workers not under ESI
ESI	1948	Workers earning ≤ Rs 21,000/month in covered establishments
EPF / EPS / EDLI	1952/1995/1976	20+ employee establishments
Maternity Benefit Act	1961	Female employees (organised)
Payment of Gratuity	1972	10+ employee establishments
NPS (Tier I/II)	2004/2009	Government employees + others
Atal Pension Yojana	2015	Unorganised — contributory

59.5.1 ESI Contribution

Under ESI: Employee 0.75 %, Employer 3.25 % of wages → benefits include medical, sickness, maternity, disablement, dependants’, funeral expenses, and unemployment (RGSKY).

59.6 5 · Indian Social Assistance Architecture

TipMajor Social Assistance Schemes in India

Scheme	Year	Substance
NSAP (National Social Assistance Programme)	1995	Pension umbrella
↳ IGNOAPS (Indira Gandhi National Old Age Pension Scheme)		Rs 200/month for 60-79; Rs 500/month for 80+ (central; states top up)
↳ IGNWPS (Widow Pension)		Rs 300/month
↳ IGNDPS (Disability Pension)		Rs 300/month
↳ NFBS (Family Benefit)		Rs 20,000 lump sum on death of breadwinner
↳ Annapurna		10 kg food grain to eligible elderly
MGNREGA wage	2005	Right to 100 days’ employment
Food Security Act (PDS)	2013	Subsidised food grain
Ayushman Bharat (PM-JAY)	2018	Health cover up to Rs 5 lakh per family
PM Kisan Samman Nidhi	2019	Rs 6,000/year to farmers
PM Garib Kalyan Yojana	2020	Pandemic-period free food and direct transfer

59.7 6 · Funding Models

TipFinancing Approaches

Model	Substance
Pay-as-you-go (PAYG)	Current contributions pay current benefits (e.g., EPS)
Funded / accumulated	Contributions accumulated in individual accounts (e.g., EPF, NPS)
Tripartite financing	Worker + Employer + State (e.g., EPS — Government 1.16 %)
Tax-financed assistance	State funds entirely (e.g., NSAP)
Cess-financed welfare	Industry cess (e.g., BOCW Cess)

59.8 7 · Coverage Statistics

TipCoverage Numbers (Indicative)

Scheme	Approximate Coverage
ESI	~ 14 crore beneficiaries (2024)
EPF	~ 7 crore active members
EPS	~ 75 lakh pensioners
NSAP	~ 4 crore beneficiaries
Ayushman Bharat	~ 50 crore people
MGNREGA	~ 5-9 crore active job-card holders annually
e-Shram	~ 30 crore unorganised workers registered (2024)
PM-Kisan	~ 9-11 crore farmers

Yet, India’s organised-sector workforce remains under 10 % — social insurance coverage is correspondingly limited, and the bulk of welfare to the unorganised sector flows through social assistance.

59.9 8 · Universal Social Protection — Emerging Trend

The ILO’s Social Protection Floor Recommendation (R-202, 2012) advocates a minimum floor of:

• Universal access to essential healthcare.
• Basic income security for children.
• Basic income security for working-age persons unable to earn.
• Basic income security for the elderly.

The Code on Social Security 2020 nudges India towards this floor by extending coverage to gig and platform workers.

59.10 9 · Position under the Code on Social Security 2020

The Code merges both pillars:

• Chapter IV — Provident Fund (EPF).
• Chapter V — ESI.
• Chapter VI — Gratuity.
• Chapter VII — Maternity Benefit.
• Chapter VIII — Employees’ Compensation.
• Chapter IX — Social security for unorganised workers, gig workers, platform workers.
• Chapter XIII — Social Security Fund.
• Chapter X — Building and other construction workers’ welfare cess.

59.11 10 · International Comparison

TipInternational Models

Country	Mix
Germany	Bismarckian insurance — sickness, accident, pension, unemployment, long-term care
UK	Beveridgean — NHS (universal) + means-tested benefits + contributory pensions
USA	Social Security (insurance) + Medicare/Medicaid (assistance) + SNAP food assistance
Sweden	Universal flat-rate + income-related
Singapore	Central Provident Fund (mandatory savings)
India	Mixed — insurance for organised + tax-funded assistance for unorganised

59.12 11 · Critique

• Targeting errors in social assistance — exclusion / inclusion errors.
• Low benefit levels of pensions (Rs 200-500/month for IGNOAPS).
• Coverage gap — informal workers largely excluded from contributory schemes.
• Fund sustainability — PAYG schemes face demographic pressure.
• Administrative cost in delivery.

59.13 Practice Questions

Q 01DefinitionEasy

Social insurance is characterised by:

• ANo contribution
• BWorker and employer contribution
• CMeans-test
• DPure charity

View solution

Correct Option: B

Contribution-based.

Q 02AssistanceEasy

Social assistance is:

• AContributory
• BTax-funded, means-tested
• CUniversal regardless of need
• DEmployer-financed

View solution

Correct Option: B

Tax-funded, means-tested.

Q 03First insuranceMedium

The first compulsory sickness insurance scheme was introduced in:

• AUK 1942
• BGermany 1883
• CUSA 1935
• DFrance 1898

View solution

Correct Option: B

Bismarck's Sickness Insurance Act 1883.

Q 04ESI rateHard

Current ESI contribution rates are:

• AEmployee 1.75 %, Employer 4.75 %
• BEmployee 0.75 %, Employer 3.25 %
• CBoth 12 %
• DBoth 1 %

View solution

Correct Option: B

Reduced effective 1 July 2019.

Q 05IGNOAPSMedium

IGNOAPS is a:

• AContributory pension
• BTax-funded social assistance pension
• CProvident fund
• DInsurance

View solution

Correct Option: B

Old-age social assistance under NSAP.

Q 06NFBSHard

NFBS provides:

• ARs 20,000 lump sum on death of breadwinner
• BMonthly pension
• CHealth insurance
• DFood security

View solution

Correct Option: A

National Family Benefit Scheme.

Q 07PAYGHard

Pay-as-you-go financing means:

• ACurrent contributions finance current benefits
• BEach worker funds his own benefits
• CGovernment pays the entire cost
• DBeneficiaries pay user charges

View solution

Correct Option: A

PAYG = current contributions to current benefits.

Q 08AdarkarMedium

The Adarkar Plan (1944) was the basis for:

• AEPF Act
• BESI Act
• CMaternity Benefit Act
• DGratuity Act

View solution

Correct Option: B

B.P. Adarkar's report led to ESI Act 1948.

Q 09R-202Hard

The ILO Social Protection Floor Recommendation is:

• AR-202 (2012)
• BC-102 (1952)
• CC-87 (1948)
• DR-204 (2015)

View solution

Correct Option: A

R-202 2012.

Q 10MatchHard

Match scheme with type:

(i)	EPF	(a)	Social assistance
(ii)	ESI	(b)	Social insurance
(iii)	IGNOAPS	(c)	Universal service
(iv)	NHS-style health	(d)	Provident fund

• A(i)-(d), (ii)-(b), (iii)-(a), (iv)-(c)
• B(i)-(b), (ii)-(d), (iii)-(c), (iv)-(a)
• C(i)-(a), (ii)-(c), (iii)-(b), (iv)-(d)
• D(i)-(c), (ii)-(a), (iii)-(b), (iv)-(d)

View solution

Correct Option: A

EPF-PF; ESI-insurance; IGNOAPS-assistance; NHS-universal.

Q 11NSAPMedium

NSAP was launched in:

• A1985
• B1995
• C2005
• D2015

View solution

Correct Option: B

1995.

Q 12ESI wageMedium

The ESI wage ceiling is:

• ARs 6,500
• BRs 15,000
• CRs 21,000
• DRs 25,000

View solution

Correct Option: C

Rs 21,000/month.

Q 13CPFHard

Singapore's Central Provident Fund is an example of:

• APAYG insurance
• BFunded provident fund
• CPure social assistance
• DCharity

View solution

Correct Option: B

Funded individual accounts.

Q 14MGNREGAMedium

MGNREGA guarantees up to:

• A50 days of employment
• B100 days of employment
• C200 days of employment
• D365 days of employment

View solution

Correct Option: B

100 days per household.

Q 15PM-KisanMedium

PM Kisan Samman Nidhi provides:

• ARs 2,000/year
• BRs 6,000/year
• CRs 12,000/year
• DRs 18,000/year

View solution

Correct Option: B

Rs 6,000/year direct transfer.

Q 16DisabilityMedium

IGNDPS provides:

• ADisability pension under NSAP
• BOld-age pension
• CMaternity benefit
• DFood subsidy

View solution

Correct Option: A

Indira Gandhi National Disability Pension.

Q 17SequenceHard

Arrange in chronological order — major Indian social security statutes:

• AEPF Act → Workmen's Compensation → ESI → Maternity Benefit
• BWorkmen's Compensation → ESI → EPF → Maternity Benefit
• CESI → EPF → Maternity Benefit → Workmen's Compensation
• DMaternity → EPF → ESI → Workmen's

View solution

Correct Option: B

1923 → 1948 → 1952 → 1961.

Q 18AnnapurnaHard

Annapurna scheme under NSAP provides:

• A10 kg food grain to eligible elderly
• BCash pension
• CHealth cover
• DFuneral expenses

View solution

Correct Option: A

10 kg food grain.

Q 19RightMedium

Which is a right-based social assistance?

• AMGNREGA
• BEPF
• CEPS
• DESI

View solution

Correct Option: A

Right to 100 days of employment.

Q 20Code 2020Easy

The Code on Social Security 2020:

• AReplaces only social insurance Acts
• BReplaces only social assistance schemes
• CBrings both pillars under one statute, including unorganised, gig and platform workers
• DOnly covers government employees

View solution

Correct Option: C

Unified framework.

59.14 Quick Recall

ImportantQuick recall

• Social insurance — contributory; social assistance — tax-funded means-tested.
• Origin: Bismarck 1883 (insurance); Beveridge 1942 (universalist).
• Three pillars: insurance / assistance / universal services.
• Indian insurance: ESI (0.75 % + 3.25 % up to Rs 21,000), EPF (12 % + 12 %), EPS, EDLI, Gratuity, Maternity.
• Indian assistance: NSAP (1995) — IGNOAPS, IGNWPS, IGNDPS, NFBS, Annapurna; MGNREGA (2005); PM-JAY (2018); PM Kisan (2019); PMSYM (2019).
• Funding models: PAYG (EPS), Funded (EPF, NPS), Tripartite (EPS — Govt 1.16 %), Tax-financed (NSAP), Cess (BOCW).
• Adarkar Plan 1944 → ESI Act 1948.
• ILO C-102 (1952) — minimum standards; ILO R-202 (2012) — Social Protection Floor.
• Code on Social Security 2020 — unified statute covering insurance + assistance + gig and platform workers.
• Coverage gap remains India’s biggest challenge — 90 %+ in informal sector.