I firmly advocate social insurance (which is to be administered as a negative income tax,and educational and health support) as a part of the classical liberal model that India should transition to. 

This model of social insurance is QUITE different to the American social security model.

In 1997 while undertaking a doctorate in economics in USA I worked part time as a consultant to an American political party for a research project to examine the viability of social security in USA and options to fix it.  My studies demonstrated that US was in deep strife with serious shortcomings in the way the scheme was designed and funded.

I won't go into details here, but an excellent write up today in Marginal Revolution (a blog I strongly recommend that you subscribe to if you don't yet do so) shows that at least three Nobel laureates have described the American social security system as a Ponzi game.

Milton Friedman is one of them, but even the Keynesians Paul Samuelson and Paul Krugman have described the US social security program as a Ponzi game.

In the blog post Alex Tabarrok makes a mistake at the end, in saying that the American scheme has now only gone "flat", not "bust". In the next few years, approximately 2017, it will take on the characteristics of a "bust" as the liabilities sky-rocket while there is basically no way to pay except through more and more borrowings – at precisely the time when US can least afford to borrow even more.

Given this, I have repeatedly stated that the premium (tax) designed for the social insurance program in India MUST be actuarially fair, and this fund should also be lodged into a diversified portfolio. And we DON'T want any old age pension support. Let the the people save for their own future. If they fall below the very frugal poverty line, then social insurance will kick in. But not before that.

Any social insurance scheme that is designed to support people in their old age WILL be ripped off as people (e.g. in Australia) BURN their savings and travel across the world before retirement because they know the government will pay for their old age. Australians display serious irresponsible behaviour and I don't doubt that Americans do, too.

The social insurance scheme must be incentive compatible, and must not go into positive liberty concepts and support. It must be founded on stern principles of liberty and responsibility, not socialism. The American scheme is socialist.

Also see:

http://sabhlokcity.com/2010/01/the-social-minimum-a-running-analysis/