Mumbai: Rating agency CRISIL on Tuesday said that the government would have to bear a heavy fiscal burden by 2030, if India fails to provide adequate pension coverage to employees working in the private sector.
CRISIL said that there are nearly 100 million people aged over 60 years in India, which will triple to 300 million by 2050. “If a large number of old people end up having no pension by 2030, the government will have to bear the heavy fiscal burden of providing minimum sustenance to them. A multi-fold increase in pension coverage to the private sector is therefore an imperative,” it said.
Currently there are only 8 per cent or 4.8 million retirees from private sector who are receiving pension benefits. However, government employees joining service after 2004 are covered under the defined contribution formula of the NPS. Hence the government’s liability on account of these employees will decline to 0.7 per cent of GDP by 2050 from 2.2 per cent of GDP currently.
According to CRISIL’s estimate, if 70 per cent private sector retirees are covered by some pension schemes, the government’s pension bill for providing minimum sustenance to the remaining 30 per cent would rise by 120 basis points to 3.4 per cent of GDP by 2030. Under the worst-case scenario, if private-sector coverage stays chronically low at its current level of 8 per cent even by 2030, the government will have to formulate a pension sch-eme to support the entire population of the old.
This will raise the fiscal burden to as high as 4.1 per cent of GDP, assuming a monthly payout of Rs 1,000 per pensioner. “In either event, the fiscal burden of pension is high. In comparison, the government spends 3-3.4 per cent on education and just over 1 per cent of GDP on public health,” said Roopa Kudva, MD and CEO, CRISIL.
