7th Pay Commission: RBI’s big statement on the old pension scheme of central employees, said something special to the states
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7th Pay Commission: Amidst the election season in the country, politics regarding the old pension scheme has become very intense. Many states have implemented the old pension scheme for retired state employees. In such a situation, central employees are also putting pressure on the government to implement the pension scheme. Meanwhile, the Reserve Bank has once again warned the states and the central government regarding the old pension scheme. RBI has said that implementing this will put a lot of pressure on the finances of the states and their capacity for development related expenses will be limited. The report released by the Reserve Bank on ‘Finances of the States: A Study of the Budget of 2023-24’ also states that the provision of goods and services, subsidies and transfers and guarantees that are detrimental to society and consumers will worsen their financial condition. Will reach critical condition. It is noteworthy that the governments of Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have informed the Central Government and the Pension Fund Regulatory and Development Authority (PFRDA) about the decision to implement the old pension scheme for their employees. The Finance Ministry has recently informed the Parliament that these state governments have requested to refund the amount of contribution of their employees in the new pension scheme.
Will be a burden on state finances
The Central Bank’s report said that the implementation of the old pension scheme in some states and the report of some other states also moving in the same direction will put a heavy burden on the state’s finances and their ability to spend to accelerate economic growth. Capacity will be limited. It said that according to internal estimates, if all state governments replace the National Pension System (NPS) with the old pension system, the cumulative fiscal burden could be up to 4.5 times that of the NPS. The additional burden will reach 0.9 percent of annual GDP by 2060. The report says that this will increase the pension burden for retired people coming under the old pension system. The last batch of these people are likely to retire in the early 2040s. Therefore, they will receive pension under the old pension under OPS till 2060s.
States should not compromise with the interests of generations
The RBI report says that thus returning to the old pension of the states would be a big step backwards. This step will reduce the benefits of past reforms and compromise the interests of future generations. The report said some states have budgeted fiscal deficit to exceed four per cent of GSDP (state gross domestic product) in 2023-24, while the all-India average is 3.1 per cent. Their debt level is also more than 35 percent of GSDP, while the all India average is 27.6 percent. It said that any additional provision for goods and services, subsidies, transfers and guarantees that are detrimental to society would worsen their financial position and hamper the overall fiscal strength achieved in the last two years. According to the report, the improvement in the state’s finances that took place in 2021-22 will continue in 2022-23. The combined gross fiscal deficit (GFD) of the states stood at 2.8 per cent of the gross domestic product (GDP) – which was below the budget estimate for the second consecutive year. The main reason for this was the reduction in revenue deficit.
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