The US is finally ready to start talks with India on a bilateral totalisation pact after years of stalling negotiations on the ground that the social security systems of the two countries were not compatible.
An agreement on totalisation (also called a social security pact) can help Indian IT companies such as Infosys, Wipro and TCS save up to $4 billion in annual deposits made into the US social security kitty that their Indian workers could neither use nor get refunded.
“We have been informed by the US that they are ready for discussions on a totalisation agreement with India. The first meeting will be in May, probably in Washington. The venue is yet to be finalised,” a senior government official told
Washington’s decision follows talks between US President Barack Obama and Prime Minister Narendra Modi in February, where India expressed its concern over the US’ lack of interest in taking the proposed pact forward.
Obama had assured Modi and also Indian businesses that discussions on the issue would, indeed, re-start.
India’s demands are straightforward. It wants the US to exempt Indian workers on H-1B visas from contributing to social security as they are not eligible for refunds.
According to US laws, social security refunds can be claimed by foreign workers after 10 years of service, whereas H-1B visas are given only for six years.
“We want that the US to straightaway exempt H-1B visa holders from contributing to social security. The other nuances of the pact can be worked out simultaneously,” the government official said.
The main reason the US stopped discussing the pact with India years ago was its concern that India did not have social security cover for old age, death and disability for most of its workers, and its (US) law did not allow a pact with such countries.
India’s argument is that it has a large number of social security schemes such as the Employees’ Provident Fund, the Rashtriya Swasthya Bima Yojana, various old age pension schemes and the Mahatma Gandhi National Rural Employment Guarantee Scheme.
Universal social securityMoreover, the Central government is also moving towards universal social security through the Atal Pension Yojna’, announced in this year’s Budget.
India has also been arguing that since it has concluded social security pacts with Canada, France and Germany, which also have similar pacts with the US, there is no reason why it cannot ink one with the US.