RBI advises states against reverting to old pension scheme, says big risk

Himachal Pradesh, Chhattisgarh, Rajasthan and Punjab have decided to roll out the old pension scheme

null
BS Web Team
2 min read Last Updated : Jan 17 2023 | 10:22 AM IST
Amid a move by some state governments to restore the old pension scheme (OPS), the Reserve Bank of India has put forth its reservation against it, saying doing so would entail a major risk for the sub-national fiscal horizon.

Earlier this month, Himachal Pradesh became the fourth state to revert to the OPS for state government employees. Chhattisgarh and Rajasthan, too, have rolled out the old pension scheme. Both these states are ruled by the Congress party. Besides them, the AAP-ruled Punjab has preferred the OPS.

According to The Hindu Businessline, the RBI said in its report on state finances that the annual savings in fiscal resources by reverting to the OPS ARE "short-lived". "By postponing the current expenses to the future, states risk the accumulation of unfunded pension liabilities in the coming years,” the RBI report said.

Themed “Capital Formation in India: The Role of States”, it said states should "mainstream capital planning rather than treat them as residuals".

They should increase allocations of capital expenditure for sectors like health, education, infrastructure, and green energy transition to expand production capacities and create a broad-based developmental agenda. Also, outlays on social services and physical infrastructure can enhance productivity, it added.

The report also stressed that the states should form responsible climate change policies in areas such as clean energy, clean transport and sustainable land use. Capacity building on access to finance and climate governance would help states meet their potential and realise the committed national target of net zero emissions by 2070.

It noted that the fiscal health of states has rebounded from pandemic-induced stress, aided by buoyant revenue collections and prudent expenditure management.

One subscription. Two world-class reads.

Already subscribed? Log in

Subscribe to read the full story →
Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

Topics :pension schemeRBIBS Web Reportseconomy

Next Story