India upbeat on social security talks with US as systems between 2 nations get ‘more compatible’

Amiti Sen New Delhi | Updated on July 20, 2020

Deal could help Indian firms in US save up to $4 billion in annual social security deposits

India is positive about the proposed talks with the US Social Security Administration (SSA) on the long-pending totalisation agreement, as it believes the systems of the two countries are more compatible now than earlier. The agreement could help Indian companies in the US save up to $4 billion in annual social security deposits.

US Commerce Secretary Wilbur Ross recently told Commerce & Industry Minister Piyush Goyal that he was ready to arrange discussions between US SSA officials and their Indian counterparts on the matter so that the basic issues holding back the totalisation pact are sorted out.

“India is positive about the talks as new social security schemes have been introduced in the country over the past few years and the coverage has also widened, leading to greater compatibility of the two coutries’ systems,” an official close to the development told BusinessLine.

Some, however, believe that the US may be unwilling to consider a pact till India implements a universal social security system. “There is a possibility that the US SSA will insist on a universal social security system which covers the entire population before it agrees to a totalisation pact,” a Delhi-based trade expert said.

What the deal does

A totalisation agreement, popularly known as a social security agreement, exempts foreign workers on non-permanent visas from contributing to social security in the nation of employment, as they are not eligible for refunds there.

India has been insisting on such a pact because, as per US laws, social security refunds can be claimed by foreign workers after 10 years of service, whereas H-1B visas are given only for up to six years. As a result, the social security deposits cannot be utilised by the workers at all.

As per industry estimates, Indian companies, mostly in the IT sector, lose up to $4 billion in annual deposits in the US social security kitty, which never gets refunded.

New Delhi and Washington had several rounds of talks on a totalisation agreement about a decade ago. But the talks were suspended as the US said India did not provide enough social security cover to its citizens and the systems in the two countries were too incompatible for a pact to be worked out.

After the Modi government came to power in 2014, attempts were made to re-start the negotiations twice, once in 2015 and again in 2018, but they were not successful.

New schemes

However, this time, India believes its chances of convincing the US of compatibility are more as it has launched several new social security schemes, for the aged as well as those in the unorganised sector, over the past few years.

These include the PM Shram Yogi Maan-dhan providing an assured monthly pension of ₹3,000 a month to workers in the unorganised sector who earn up to ₹15,000 per month, and increased allocation under the National Social Assistance Programme covering old age, disability and widow pension, and family benefits to select segments of the population. There are also pension schemes for traders and the self-employed apart from the Atal Pension Yojana for the unemployed.

“The US has formalised totalisation pacts with countries such as Canada and Australia. India is hopeful of getting on that list too,” the official added.

Published on July 20, 2020

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