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Source: The post is based on the article “Don’t Look Back – Don’t change NPS’s fiscal fundamentals” published in The Times of India on 25th March 2023.
Syllabus: GS3- Economy
Relevance: About NPS.
News: Recently Finance Minister has made an announcement on the National Pension Scheme (NPS) in Lok Sabha.
About the announcement on NPS
A committee will be set up under the finance secretary. The committee will be tasked to evolve an approach for balancing the needs of government employees without diluting fiscal prudence. It will be designed for adoption by both states and the Centre.
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NPS was introduced two decades ago as a reform to ensure fiscal stability. It replaced the incoming government servants with a guaranteed pension, OPS.
NPS has tried to create schemes to attract savings from unorganised sector workers to provide an old age savings corpus.
|Must read: Comparison of National Pension Scheme with Old Pension System – Explained, pointwise|
What should be done while revising the NPS?
Keep in mind the fiscal fallout: The proposed committee should keep in mind that the defence ministry is struggling to cope with the fiscally unwise OROP for ex-servicemen.
Recently the Supreme Court allowed the government to pay out OROP arrears of Rs 28,000 crore to safeguard defence preparedness. The incident encapsulates the fiscal fallout of guaranteed pensions.
Pension comprises only a small corpus of the labour force: India’s labour force is dominated by the self-employed. So, it is unfair provide a guaranteed pensions for a tiny fraction of the workforce.
|Read more: The old pension scheme as a burden on the poor|