NB Explains | Why the Old Pension Scheme is Bad for the Economy
06 Apr 2023 10:58:48
This article is based on a Twitter thread by @ShamikaRavi
The Old Pension Scheme has returned to our political discourse once again. Unfortunately, some states have also implemented the Old Pension Scheme.
Dr. Shamika Ravi, a member of the Economic Advisory Committee to the PM has written an article on the Old Pension Scheme and why it is bad for the economy. In her article and Twitter thread, she has shared many graphs showing how several states are already spending much more than the national average on pension payments. In those graphs, we can see states like Gujarat, Maharashtra, and Karnataka managing to keep their Pension payment lower than the national average whereas, states like Tamilnadu, Kerala, and Punjab are reeling under the pressure of high pension payments.
Over 30 yrs, pension payment as % of development expenditure reveals:
1) NPS was a major breather to ALL states
2) Some states have managed to keep the burden low: GJ, HR, MH, KA, MP, CT (< avg for all states: red line)
2) Some states reeling under pressure: TN, KL, PB
Results for smaller states:
Reversal to OPS in HP (which already has an excessive burden of >30% under NPS) portends a grave trade-off from development spending in the state.
Dr. Ravi has explained how high levels of spending on pension payments as a percentage of development expenditure result in considerably less money for basic infrastructure and other developmental works in many states. Most smaller states which rely heavily on the Central government for their funds have above-the-national average spending on pensions. Pensions serve a very small section of society at a great cost to everyone in the state.