In a candid assessment of the ongoing debate surrounding pension schemes in India, Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission, on Thursday expressed strong opposition to the idea of reverting to the Old Pension Scheme (OPS). Ahluwalia, who has been a prominent voice in India’s economic policymaking, said that bringing back the OPS was a “bad idea” and asserted that the New Pension Scheme (NPS) could always be modified to address any concerns.
Speaking to ANI, Ahluwalia elaborated on his views, stating, “The fact that we moved away from the Old Pension Scheme to the New Pension Scheme is good. It happened during the Vajpayee government, and the UPA government continued it. As far as the central government is concerned, it still continues.” His remarks were in response to growing demands from various states to revert to the OPS, which guarantees a fixed pension based on the last drawn salary.
Ahluwalia, who has long been an advocate of economic reforms, maintained that the shift to the NPS was necessary and beneficial in the long run. “Some states going back to the Old Pension Scheme is a mistake,” he added, stressing that while the OPS might seem appealing in the short term, it would prove unsustainable in the future. He pointed out that the NPS is more adaptable, and concerns regarding it could always be addressed through modifications.
“The New Pension Scheme is not perfect, but it offers flexibility. If concerns are raised, the scheme can be reformed rather than scrapping it entirely,” Ahluwalia said, urging policymakers to focus on improving the existing system rather than returning to the old one.
Ahluwalia raises concerns over India’s fiscal deficit
Ahluwalia also raised serious concerns regarding India’s fiscal deficit, which continues to hover at unsustainable levels. He highlighted the urgency of devising a clear roadmap for reducing the fiscal deficit of both central and state governments. According to Ahluwalia, India’s fiscal deficit is significantly higher than that of other developing nations, which in turn, limits the resources available for private investment and economic growth.
“India’s fiscal deficit is significantly higher than other developing nations, which squeezes resources away from private investment,” Ahluwalia explained. He further stressed that the high fiscal deficit could hamper the country’s ability to achieve its growth aspirations and urged the government to prioritise fiscal consolidation.
Additionally, Ahluwalia pointed out the issue of state governments hiding their deficits by borrowing under the guise of public sector enterprises. This practice, he said, only exacerbates the fiscal burden on the economy and undermines efforts to maintain fiscal discipline.
A call for ‘second generation reforms’
In a wider reflection on India’s economic trajectory, Ahluwalia underscored the need for what he termed “second-generation reforms.” While the country had already undertaken significant economic reforms in the past, especially in the 1990s, the challenges faced by today’s economy were more complex and required a new approach.
“I think we’re now at a stage where the economy has become much more complex, and you need a new set of reforms to deal with the more complex challenges that we face. I think somebody should outline them, and unless we get this done, I don’t think we will reach Viksit Bharat,” Ahluwalia stated, referencing the government’s goal of transforming India into a developed nation, or ‘Viksit Bharat.’
Ahluwalia’s call for a second generation of reforms is rooted in his belief that India’s economic landscape has evolved. As the country grapples with issues like rising inequality, employment challenges, and the changing nature of global trade, Ahluwalia stressed the need for a more comprehensive reform agenda that addresses these issues while continuing the momentum of economic liberalisation.
More Read
Acknowledging Manmohan Singh’s contributions
Reflecting on India’s economic journey, Ahluwalia also took a moment to pay tribute to the late former Prime Minister, Manmohan Singh. Ahluwalia described Singh’s tenure as Finance Minister in the early 1990s as historic, citing his role in the liberalisation of India’s economy.
“What he did as a finance minister was historic,” Ahluwalia remarked. “He turned around the policies that we were following for the last 30 years.” Ahluwalia’s praise for Singh’s contributions highlights the pivotal role that economic reforms played in shaping India’s modern economic landscape, and how Singh’s leadership at a critical juncture transformed the country’s economic trajectory.
In conclusion, Montek Singh Ahluwalia’s comments offer a sobering perspective on the challenges facing India’s economic future. While acknowledging the need for reforms, he emphasised the importance of maintaining fiscal discipline and adapting to the complexities of the global economy. His stance on the Old Pension Scheme and fiscal deficit reflects a pragmatic approach to India’s growth ambitions, calling for a measured and forward-thinking strategy to tackle the country’s most pressing economic issues.
