BS Number Wise: Old scheme puts burden of employee pension on the states

Some governments are seeking short-term benefits to finance their bills, risking their financial security


Ishaan Gera New Delhi
The Robinson Crusoe economy is a good example to explain the concept of comparative advantage and inter-generational consumption. In a Crusoe economy, where the only occupation is fishing, the current generation controls consumption and conserves for the future. The system works until a generation starts apportioning a larger share of fish.

Some Indian states could be accused of such short-sightedness as they return to an old pension scheme for government employees. The old scheme puts the burden of employee pension on the state; the new system sets contributions from the employer and employee. Returns in the new system are market linked.

In its July bulletin, an article by Reserve Bank of India researchers warned against the rising bill for pensions.

First Published: Oct 04 2022 | 10:26 PM IST

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