With multiple State governments announcing reversion to the old pension scheme (OPS) and some more speculating to do the same, the debate on pensions is hotting up. Most economists have frowned upon this arguing that this is bad economics on at least two grounds. Firstly, since the State has to bear full burden of pensions, it will become fiscally unsustainable in the medium to long run. Second, such an unsustainable rise in pension allocation in the Budget can only come at the cost of other more pressing welfare expenditures allocated to the poor and marginalised sections. The OPS, therefore they argue, is a case of elite workers gaining at the cost of their brethren lower on the income ladder.
Both the arguments assume the fiscal revenues to be fixed, which need not be the case if the government has its priorities right. Instead of rationalising necessary expenditure, the government should rationalise taxes, say by implementing inheritance and wealth taxes, which are either negligible or non-existent in India. But let us leave this aside.
Public sector workers are asking for a guaranteed pension in place of the new pension scheme (NPS), which fluctuates according to the returns prevailing in the market. They are not freeloaders wanting the State to fund their post-retirement lives. We believe that they can deduct employees’ contributions towards pension during the working life, but can give them a guaranteed pension after they retire. The workers would readily accept such a contributory guaranteed pension scheme (CGPS), a blueprint of which we present in this piece.
