Revisiting the Old Pension Scheme: A Major Risk to India's Financial Stability Posted on February 3, 2023 News By Akta Yadav 413 Views Old Pension Scheme:- Introduction The Haryana Chief Minister, Manohar Lal Khattar, recently spoke about the drawbacks of the Old Pension Scheme (OPS) and cited a WhatsApp message to support his argument. The Chief Minister stated that a Central government official sent him a message indicating that if the OPS is implemented, the country could be bankrupt by 2030. Old Pension Scheme He also referred to former Prime Minister Manmohan Singh's 2006 opposition to the OPS, calling it a "myopic vision" that could make India backward. The Reserve Bank of India (RBI) also warned about the reversion to the OPS by some states, saying it could result in the accumulation of unfunded liabilities in the coming years. The National Pension System (NPS) In 2004, the Union government introduced the National Pension System (NPS) as a defined contribution pension scheme, replacing the old pension scheme. Under the old pension scheme, employees are entitled to a 50% pension amount based on their last drawn salary. However, the NPS is a contributory pension scheme, where the pension amount depends on the employee's contributions. Risk to States' Finances Economists have expressed concern over the reversion to the OPS, stating that it could put stress on states' finances. Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission, called the move one of the biggest reversals. The RBI report for 2022-23 stated that states have budgeted an increase in revenue spending, led by non-developmental expenditures like pensions and administrative services. Old Pension Scheme Budget Allocations The RBI report also highlighted that funding for medical and public health and natural disasters has been reduced, while the housing outlay has been increased. Conclusion The return to the OPS could pose a major risk to India's financial stability and put stress on states' finances. Several economists and the RBI have expressed concern about the move and the potential accumulation of unfunded liabilities in the coming years. It is important for the government to consider these warnings and make informed decisions that ensure the long-term financial stability of the country.
Old Pension Scheme
He also referred to former Prime Minister Manmohan Singh's 2006 opposition to the OPS, calling it a "myopic vision" that could make India backward. The Reserve Bank of India (RBI) also warned about the reversion to the OPS by some states, saying it could result in the accumulation of unfunded liabilities in the coming years.
Old Pension Scheme
