Belligerent unions and an intransigent Left seem to have effectively stalled the government’s move to reform pension schemes. The Pension Fund Regulatory and Development Authority Bill, which would have paved the way for the creation of an independent regulatory body to oversee and administer pension reforms, looks unlikely to become law in its present form. The economic case for reforming the current ‘guaranteed return’ scheme is compelling. The Centre’s outlay on pensions has been growing at close to 18 per cent every year. States, with lesser resources but a similar level of liabilities, are worse off. Overall, pension outlay is estimated to be over 1.6 per cent of GDP, and growing. This is a burden the government can ill afford. However, logic has so far stood little chance against rhetoric.
Ironically, the biggest victims of the delay come from the very section of society whose cause the Left parties claim to espouse. It took six years and a few changes of government before the first step could be taken towards creating some sort of post-retirement security for the millions of Indian wage earners who did not enjoy the privilege of being employed in the government or the organised sector. The New Pension Scheme (NPS), mooted two years ago, was originally meant to provide some sort of cover for the more than 350 million workers in the unorganised sector. That, however, was to be implemented through voluntary action. It was when the government moved to extend this to employees entering service after the introduction of the NPS that the filibuster began. The government’s proposal to let the Employees Provident Fund Organisation (EPFO) to invest 5 per cent of its corpus in the stock markets has run into violent opposition from trade unions.
Admittedly, all equity investments carry an inherent risk. But the stubborn refusal to even consider a compromise flies in the face of reason. One doesn’t have to be a maths whiz to work out that a market that is gaining a couple of per cent a month would deliver better returns than the 8 per cent from government securities. Meanwhile, those who can afford it the least — low income employees and unorganised sector workers — are getting hit the hardest. It is time that broad public interest took precedence over narrow political interests.