Sunday, December 10, 2006

Not ‘left’ to lurch

Pensioners can plan on private fund managers, right on

This time let me straight away come to the point. To the uninitiated, the Indian government is on the verge of bankruptcy. And the villain of peace is – pensions. A recent report suggested that in the next three years, the combined annual pension liability of the central and the state governments put together would be staggering Rs 2 trillion. Currently, it gobbles up nearly 15% of the government’s annual revenue and is growing at the rate of 19% annually. The actual pension liability is at a colossal Rs 17 trillion which is more than half of India’s GDP. Thanks to the Fifth Pay Commission, the wages and pension liabilities have left most of the state governments bleeding and bereft of money for development. It is amazing that, given the conditions, the policy mavens are still debating if they should bring reforms in the pension policy. Beneath the seasoned speechifying, there lies a deeper connotation that just can’t be ignored by merely terming it as a myopic and Jurassic Age mentality.

That apart, the bigger contention is that this assured pension is given away to the privileged 2% government employees for their ‘stupendous’ contribution to India during their term of service, by being perpetually late to office, blatantly arrogant to visitors/vendors/customers, by unnecessarily and perennially delaying crucial files and nonchalantly preventing good projects from coming up. More surprisingly, this money is not earned by productive investments in infrastructure or capital intensive projects but rather distributed from the tax payers’ hard earned money. It is this 2% who spend their entire life in a cosy environment, in the cushion of a secure job which in any case would not be taken away, even if they decide not to work (which is true in most cases). Compare this with more than 380 million people engaged in the unorganised sector, around 300 million people who live below the poverty line, and almost 100 million educated unemployed youth, who get zilch in the name of social security. It is nothing less than hypocritical that we just keep on pampering the minority government employees at the cost of majority underprivileged citizens.

This does not mean that the old and senior citizens should be left in the lurch. This also does not mean that our governments, both state and central, to appease a minority, must stick to a fixed return. What essentially the government wants, and which is also correct, is to let professional funds manage this corpus by investing it in Indian debt and equity markets. One shouldn’t also forget that there is a lot of resentment and skepticism with respect to the stock markets, which again is understandable. But the elders need to understand that pension funds would empower them to manage their own risk and return. Moreover, when their progenies are working day and night, toiling hard to take India into the next league of development, they should not have any doubts on their future (with valid performance of debt and equity markets).


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