RBI’s WARNING STATE GOVERNMENTS IS HIGHLY RETROGRADE

N.RAJAGOPAL

In mid-January, this year, (Reserve Bank of India) RBI has warned the State Governments which have switched over to Old Pension Scheme and those who contemplate to do so, that may put them in fiscal burdens at a later period. RBI, through studies undertaken by various agencies has come to the viewpoint that a significant risk is looming large on the subnational fiscal horizon in case of reversion to the old pension scheme by some State Governments. “The annual saving in fiscal resources that this move entails is short-lived. By postponing the current expenses, states risk the accumulation of unfunded pension liabilities in the coming years” cautions RBI.  Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himalchal Pradesh are the States that would switch over to old pension scheme.

It may be noted that the central government, to a specific question in the Parliament, had informed that the funds accumulated by these states in the New Pension Scheme could not be now transferred back to these states as there is no specific provision to do so in the Pension Fund Regulatory and Development Authority (PFRDA) rules. Further the Government of India declared that it has no plan to revert to old pension scheme for its employees.

On a perusal of these two statements by the Central Government and RBI, one has some genuine doubts:

• Can the Union government act against the decision of the State Governments? Will it not be against the spirit of federalism?
• Even going by the central government’s statement, is it such an impossible task to amend the rules and refund the amount to the States which want to provide a better social cover to their employees on retirement?
• Can the old pension scheme, a far superior scheme to the new pension scheme be shelved on the basis of “fiscal burden”?
• Can the move of the State governments, which want to provide a better social security to their employees, be scuttled stating “fiscal burden” by some studies?
• What are the studies that RBI has undertaken on Non-Performing Assets which spoil the health of banking industry and ways suggested to recover them in full?
• What was the role played by RBI on demonetisation and its advice to the central government? Everyone knew the ill-effects the demonetisation played on the common man of this country.

These questions should be an eye-opener to all the central agencies which advocate scaling down of welfare concepts to avoid of fiscal burden.

The working class, through massive struggles, has forced the State Governments to revert to old pension scheme to their employees. It is a victory to the working class that 5 State Governments have announced to abandon New Pension System and restore old pension scheme. Bank unions are also demanding to revert back to old pension scheme.

Now, in the name of study, RBI’s warning against the move of the States adopting the old pension scheme is highly retrograde. It clearly reveals the pro-corporate mind set of the Government of India and RBI acting as its extended arm. Even if the study of RBI reveals that there would be more fiscal burden to the States, it is for the RBI to suggest ways and means to overcome the same and not to prevent the States from going in the right direction.