General Studies Paper 2
Context: Many State governments are announcing reversion to the old pension scheme (OPS) and some are speculating to do the same. Many economists have said that this is a bad economics. But that is not correct.
Why do many economists think the reversal of OPS is bad economics?
This is because a) the State has to bear the full burden of pensions, b) the scheme will become fiscally unsustainable in the medium to long run, and c) the unsustainable rise in pension allocation can only come at the cost of essential welfare expenditures allocated to the poor and marginalised sections.
What are the concerns associated with continuing NPS?
Those who defend the NPS say that a) The returns in the market do not stay the same, and it may actually be higher and better than the OPS, b) NPS is inflation-covered because, under normal circumstances, the returns are higher than the inflation.
But they failed to understand that the NPS puts the entire burden of uncertainty on employees alone and not on the employers.
What can be done to provide OPS without any fiscal constraints?
How a CGPS can be implemented without any fiscal constraints?
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