“ the congress is a sloganeering party “ says @nsitharaman – https://t.co/DqgJmqGN60
— pallavi ghosh (@_pallavighosh) August 27, 2024
The Indian government recently announced the introduction of a Unified Pension Scheme (UPS) alongside the existing New Pension Scheme (NPS) for central government employees. This initiative is also open to state governments and represents a significant shift in India’s pension landscape. The main difference between the UPS and NPS is the presence of a minimum guaranteed pension amount, which is half of the last drawn salary.
This guarantee is similar to what government employees were entitled to under the Old Pension Scheme (OPS).
Finance ministry and government urges OPP ruled states to accept UPS – says it’s not an U turn – https://t.co/e9TRlcIbMK
— pallavi ghosh (@_pallavighosh) August 26, 2024
However, under the new UPS, employees will continue to contribute to their pension fund, and the government’s contribution is expected to increase from 14% to 18%. As a result, the UPS is expected to be less fiscally burdensome than the OPS.
The UPS represents an important philosophical shift away from neoliberal policies that favor market-driven returns. It rebalances the risk between citizens, the state, and the markets, emphasizing the state’s role in providing economic security.
The one article to read on NPS v UPS, by @resanering https://t.co/rMH8a8CZRq via @theprintindia
— Pranay Kotasthane (@pranaykotas) August 28, 2024
The announcement of the UPS has not generated much political and media attention, which can be attributed to several factors.
Public discourse tends to amplify policies favoring capital while downplaying those that offer security to workers.
The Unified Pension Scheme sidelines NPS for government employees, a lost opportunity. The tragedy? NPS could’ve provided far better pensions if implemented as intended.
Check out the First Page column by @dhirendra_vr : https://t.co/BE38iak90L #NPS
— Value Research (@ValueResearch) August 27, 2024
Additionally, the UPS is unlikely to please capital markets, although the substantial pool of resources that will be invested in financial markets might mitigate their opposition. The impact of the UPS on the country’s labor force is relatively limited.
Government’s role in pensions expands
Government estimates suggest that the UPS could cover about 10 million people at most, which is a small fraction of India’s 550 million-strong labor force. While the policy significantly benefits government employees, its broader political influence remains minimal.
The UPS strengthens the appeal of government employment, which is already highly sought after due to job security and benefits. This initiative could enhance the government’s perception as a worker-friendly entity. However, it is important to acknowledge the vast segment of the Indian population outside the sphere of government benefits.
This majority lives with limited welfare entitlements and aspires to government jobs. The intense competition for a limited number of government positions highlights the need for broader economic reforms that offer better opportunities across the labor market. The potential for a new political force to champion the rights of this larger workforce faces several significant barriers.
These include deeply entrenched caste solidarities that overshadow class-based unities, the complexity of identifying a common adversary in a landscape dominated by small enterprises, and the immense cost of political mobilization. In conclusion, while the UPS marks a return to government-backed economic security, it highlights ongoing issues within India’s economic framework. The scheme’s limitations emphasize the need for broader reforms that address the growing divide between a small, privileged club of government employees and the vast majority of workers struggling with inadequate social protections.
The UPS is a noteworthy development, but its broader economic impact underscores longstanding critiques of India’s development model. The guaranteed pensions offered through the UPS are more a reaction to market failures in generating well-paying jobs than a triumph of labor movements.
- HindustanTimes.”Terms of Trade | Why the Unified Pension Scheme is important and unimportant at the same time”.
- EconomicTimes.”Unified Pension Scheme: Understand UPS in 10 simple points”.
- IndiaTimes.”FM Sitharaman counters Congress, says UPS ‘new package’, not rollback”.