Pension schemes around the world, whether contributory and market-linked or underwritten by the exchequer, are facing a crisis, due to multiple factors, including demographic reasons. According to the RBI, the total Budget estimates of various states and Union Territories for pension in 2023-24 was Rs5,22,105.4 crore, which is between 6-21 per cent of their total revenue receipts. That may get further aggravated as the Modi government is set to restore guaranteed pension for its employees, meeting their demand halfway, and weakly trying to hold on to principles of fiscal prudence.
With this move, the multiparty consensus that had led to the ushering in of pension reforms in the 2000s has now unravelled. Several state governments such as Rajasthan, Punjab, Himachal Pradesh and Chhattisgarh had announced a shift back to the old pension scheme, as the clamour against the new pension scheme by a small but vocal section of the electorate gained traction.
In the bargain, the Modi government has succumbed to political pressure. The New Pension Scheme (NPS), which was market-linked and managed by an autonomous entity, was introduced during the stock market boom. Two decades later, when people began retiring under the NPS – those who joined after 1 January, 2004 – it turned out that they were receiving much less than what they would have got under the old scheme.
With the Congress making the restoration of the old scheme a central piece of its politics, the BJP was pushed to the corner. A committee led by former Finance Secretary and Cabinet Secretary-designate T.V. Somanathan devised a middle path that involves employee contributions and enhanced share from the Centre. The Unified Pension Scheme (UPS) promises a pension of 50 per cent of the average basic pay of the last 12 months before retirement and a minimum pension of Rs10,000 for those who worked for at least 10 years. The Centre’s share towards the scheme was increased from 14 per cent under the NPS to 18.5 per cent.
Prime Minister Narendra Modi has said he will ensure government employees’ dignity and financial security. Economists, however, believe that the BJP and the government should note that no reform can be sustainable without broad political consensus. Also, social security for older people must cover the widest segment of the population.
The larger issues
Government employees are an organised pressure group, and having managed to restore their guaranteed pension, have largely welcomed the UPS. But the larger issues remain. While pensioners argue that it is their deferred wages, governments say that that pensions from the exchequer are at the cost of future generations. Governments are outsourcing jobs through contracts, and resorting to innovations such as Agnipath, and the ballooning of pension bills is among the reasons that drive such measures. Governments are also leaving posts unfilled. All such measures are leading to two things. First, it negatively affects state capacity, and second, it reduces avenues for government and public sector jobs for young job seekers.
Under the UPS, government employees will receive a “defined benefit” – a pension equivalent to 50 per cent of their average basic pay drawn in the year prior to retirement. To finance this, there will also be a “defined contribution” – the government will now contribute 18.5 per cent of the basic salary of employees, up from 14 per cent, while employees will continue to contribute 10 per cent. So, while this new scheme will be unlike the unfunded OPS, and may also benefit from greater clarity, assuring a “defined benefit”, a key feature of both the old pension scheme and the unified pension scheme raises the possibility of the fiscal burden on the government increasing.
The government has said that the new scheme will entail an additional outgo of Rs6,250 crore in the first year, and Rs800 crore as arrears for theemployees who have retired since the introduction of NPS. The total outgo will increase further if state government employees are onboard – as of March 2023, NPS had 23.8 lakh Central government subscribers, and 60.7 lakh state government subscribers. Thus, a return to defined benefits, which essentially involves providing generous benefits to only a tiny section of the labour force, runs the risk of not just increasing the burden on the exchequer, but also further constraining the space for spending on other avenues.
Die is caste
Caste census no longer a taboo
Finally, it was a public nudge from the Rashtriya Swayamsevak Sangh (RSS) that is reported to have set the ball rolling. After stonewalling the strident demand for a caste census, the Modi government is now said to be mulling the expansion of data collection in the long-delayed Census to include caste enumeration. This follows the RSS’s qualified support for the exercise.
Addressing the media in Kerala after a three-day coordination conclave of the RSS, the organisation’s national publicity chief, Sunil Ambekar, supported the idea of a caste census, terming it an important tool to ensure the welfare of marginalised communities. But there was one caveat from the Sangh – the exercise should not be exploited for political or electoral expediency.
The RSS’ qualified support comes in the context of demands by the Opposition INDIA bloc, and also from some constituents of the National Democratic Alliance (NDA), such as the Janata Dal (United) and Lok Janshakti Party (Ram Vilas), for a nationwide caste census. Ever since the Opposition INDIA bloc raised the demand, the BJP leadership had talked of welfare of the four ‘castes’, namely, women,
poor, farmers and youth. Earlier, the BJP had alleged that the Opposition’s demand would divide the Hindu society while it is trying to consolidate it. The BJP has been taciturn in its response to the Opposition’s demand for a caste census after the Lok Sabha election results.
For the Opposition, including parties like the Congress, JD(U), RJD, and Samajwadi Party, the caste census is a strategic tool to challenge the ruling BJP and mobilise marginalised communities. They argue that disclosing caste data will expose the socio-economic inequalities in Indian society and create an opportunity to formulate targeted policies that address these imbalances. The push also seeks to galvanise support from disadvantaged groups, thereby constructing a broader anti-BJP narrative.
Opposition leaders believe that caste data is critical to shaping affirmative action programs and providing a more equitable distribution of resources. In their view, revealing the true demographic makeup of India could lead to reforms in education, employment, and political representation, benefiting marginalised communities. By amplifying the demand for a caste census, the Opposition aims to project itself as the voice of these communities, challenging the BJP’s hold on power.
Social scientists believe that considering the incomplete and poorly constructed nature of the Socio-Economic and Caste Census of 2011, which resulted in data that were unwieldy, inaccurate, and hence unusable, the government must not hurry into utilising the office of the Registrar General and other agencies to tabulate caste. There must first be a definite time frame to conduct the Census on a war-footing. If the delay is deliberate, in order to allow for delimitation to be conducted first in 2026, this will be harmful not just to public policy but also to relations with states.
Dubious distinction
As of June 2024, out of 233 countries, India was one of 44 not to have conducted the Census this decade. The ostensible reason provided by the Union Home Ministry was delay due to the Covid-19 pandemic, but 143 other countries conducted the Census after March 2020, which marked the onset of the pandemic. India shares this dubious distinction of not having a Census with countries affected by conflict, economic crises or turmoil such as Yemen, Syria, Afghanistan, Myanmar, Ukraine, Sri Lanka and in sub-Saharan Africa.
There remains little excuse to continually delay the decennial census, an exercise that has been conducted without fail from 1881 to 2011. Yet, the deadline to freeze administrative boundaries of districts, tehsils, towns and municipal bodies – a prerequisite before the conduct of the census – lapsed on June 30 this year. This deadline has been extended 10 times since 2019. Several public schemes such as the National Food Security Act, the National Social Assistance Programme and the delimitation of constituencies are dependent upon the Census being conducted. Besides, statistical surveys that go into setting policy such as those related to household and social consumption, the National Family Health Survey, the Periodic Labour Force Survey, and the Sample Registration System, among others, use the Census to set their sampling frames. With the 2011 Census data getting increasingly outdated and phenomena such as migration across and within states, the urbanisation of Indian societies, and the suburbanisation of cities becoming increasingly prominent in recent years, the lack of a Census is telling, underscoring the need for a fresh exercise.