Posted on Jan 13, 2012 by Sergio Ulloa
India's Prime Minister Manmohan Singh made news this week with the announcement of a new state pension and life insurance scheme designed to cover the country's large expatriate workforce. The move looks to fulfill a long-standing demand of the prolific non-resident Indian diaspora and could encourage the country's millions of overseas workers, especially the many now working in the Gulf states, to invest back in their home country and save money for their future.
Dr Singh laid out the details of the government's new Pension and Life Insurance Fund (PLIF) in his inaugural address at the tenth Pravasi Bharatiya Diwas in Jaipur on Sunday. The Pravasi Bharatiya Diwas, or non-resident Indian day, is an annual event that recognizes the sizeable contribution made by the overseas Indian community to the continued development of their home country. The 1,900 delegates in attendance represented the interests of Indian expatriates from 60 countries.
Under the provisions of the PLIF, any Non-Resident Indian (NRIs) or Persons of Indian Origins (PIOs) who wish to save for their resettlement and retirement upon their return to India will be eligible for the scheme after proper immigration clearance. All subscribers who then contribute between Rs 1,000 (US$19.29) and Rs 12,000 (US$231.5) per year will receive an Rs 1,000 (US$19.29) annual co-contribution from the Indian government, with female overseas workers also eligible for a special co-contribution worth an additional Rs1,000 (US$19.29) a year. The Prime Minister added that the new scheme, which was only recently cleared by the Union cabinet, will offer a low-cost
life insurance policy for Indian expatriates that will cover against natural death, and that this could become a key savings tool for many families. "This scheme fulfils a long-pending demand of our workers abroad," Dr Singh said, adding that the PLIF "will encourage, enable and assist overseas workers to voluntarily save for their return and resettlement and old age."
In addition to this expatriate pension scheme, The Ministry of Overseas Indian Affairs was on hand to describe a new e-migrate initiative that will provide comprehensive computerized solutions for all stages in the country's previously over-encumbered emigration system. Once implemented, the system should link all key subscribers onto a common network which will then be used by workers, recruitment agencies, immigration officials, employers, and Indian missions to better coordinate expatriate movement. The scope of India's previous Labour Mobility Partnership Agreements with other countries will also soon be expand to cover more skilled workers students, academics and Indian professionals. According to a senior official, these updated agreements are currently being negotiated with The Netherlands, France, Australia and the European Union.
It has become increasingly important for Indian governments to woo their large overseas workforce with initiatives for reinvestment in their country. It is estimated that of India's 1.3 billion population, more than 25 million are currently living and working abroad. While other prominent Asian nations like China and the Philippines have been able to reap great economic reward from their expatriate workforce, be it through remittances and trade, India's emigrant investment has lagged behind, and thus the government is now trying to more actively engage their diaspora. "The government and people of India recognize and greatly value the important role being played by Indian communities living abroad. We believe that the Indian diaspora has much more to contribute in building of modern India," Prime Minister Singh said.
Of particular interest of late has been the state of India's expatriates in the Gulf
. The Indian diaspora has made up a considerable proportion of the working class in the Middle East for a while, with many moving to the rich Gulf States during the oil boom to work as construction laborers and other more specialized fields. The MENA region has proven to be an attractive destination for South Asian migrant labour due to the higher incomes available as well as the relative geographical proximity to the subcontinent. This has lead to, in 2005 for example, over 40 percent of the United Arab Emirates' population being of Indian descent. This considerable demographic development presents problems for the Indian diaspora, as citizenship and permanent residency are seldom granted to immigrants in these Gulf countries. Thus maintaining affordable access to necessary services like healthcare and retirement planning becomes an issue for many non-resident Indians. Added to this of course are increased regional security concerns
in the aftermath of the Arab spring.
These developments follow the renewed moves made by India's chief insurance regulator (IRDA) to update and liberalize the country's insurance market and encourage the rising number of Indian middle-class consumers to make more proactive insurance and investment decisions. The county's insurance sector has grown rapidly over the past decade, driven in particular by the popularity of life insurance products, which dominate the market. Since the Indian insurance market was first opened up to the private sector through the Insurance Regulatory and Development Authority Act in 1999, total insurance penetration across the country has nearly doubled, with the local market overtaking several developed economies in terms of premium output in the process. Critical to this growth has been the input from the international insurance industry
. According to a recent industry report
, over the past 10 years the market share of the previously state-run firms has decreased to 65 percent for life insurance and 60 percent for general insurance. Foreign multinational insurance companies have played a big part in this development. Despite the highly contentious 26 percent foreign ownership cap, the vast majority of insurance companies that have been established in India since 2000 have been joint venture operations with overseas partners. Overall, India represents one of the world's fastest growing insurance and pension fund markets
, with rising income levels and growing awareness of risk management amongst the populace expected to drive a substantial demand for cover and investment solutions nationwide. Contributions from the country's tremendous expatriate populace will of course play a large part in this development as well. "The 'global Indian' is a symbol of this diversity of our ancient land. Your individual prosperity and personal achievement are a symbol of what a diverse people like us can achieve," Dr Singh concluded.