Even as several non-BJP-ruled states like Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have started to implement the old pension scheme, the Reserve Bank of India (RBI) warned that it would increase the financial burden on the states.
In its report titled “State Finances: A Study of the 2022-23 Budgets”, the central bank has said that the move is a significant risk to the “subnational fiscal horizon” and may lead to the accumulation of unfunded liabilities in the years to come.
“A major risk looming on the subnational fiscal horizon is the likely reversion to the old pension plan by some states. The annual savings in fiscal resources implied by this move are short-lived,” the RBI report said.
By postponing current spending to the future, the report says states risk accumulating unfunded pension liabilities for years to come.
The governments of Rajasthan, Chhattisgarh, Himachal Pradesh, Punjab and Jharkhand have informed the Center of their decision to implement the old pension scheme, which they had promised to do in their election manifestos.
The decision of these states has led to a political struggle between the BJP-ruled and non-BJP-ruled states.
By the way, it was the BJP-led NDA government, which in 2004 abolished the old pension scheme from April 1, 2004 onwards.
Instead, the government introduced the National Pension Plan (NPS), under which government employees contribute 10 percent of their basic salary toward their pension, while the government contributes 14 percent. The private sector was also included in the NPS system.
Under the old pension scheme, retired government employees received 50 percent of their last collected salary as a monthly pension, and the amount continued to rise with rising DA rates.
The old pension scheme is not fiscally sustainable as it is not contributory in nature and the burden on the treasury continues to increase, experts have said.
Even former RBI Governor D Subbarao had recently spoken out about the negative effects of the old pension scheme.
“In a country where the vast majority of people do not have a social safety net, government officials with an assured pension are a privileged group. Privileging them further at the expense of the general public would be morally wrong and fiscally damaging,” he said. . saying.
Subbarao had warned that if state governments revert to a “pay as you go” pension scheme, the burden of pensions will fall on current income, which in turn means giving up schools, hospitals, roads and irrigation.
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