Terming the Old Pension Scheme as one of the “biggest revdis”, former Planning Commission Deputy Chairman Montek Singh Ahluwalia said though there are talks about controlling fiscal deficit, there is no suggestion of getting rid of certain expenditure.
“I find today nobody actually says that the fiscal deficit shouldn’t be under control but all time what they are saying is that…Ficci has come out (saying) we must reduce taxes, etc, there are hundreds of demands for additional expenditure. I am not aware of anyone saying that the way to fit this in is to get rid of certain expenditures.”
“…I think what the Prime Minister rightly called the revdis of the world and there are many more revdis than what we thought. I mean bringing back the old pension system is one of the biggest revdis that are now being invented. Now the question is what I don’t see is people getting up and saying by the way, I think macro stability is important and that means X, Y and Z is a bad idea and A, B and C is a good idea. The thing is that only if, this is what research institutions are supposed to guide us on, only when they start giving concrete guidance on this, the politicians will also begin to say that look I can see that behind the slogans there is a problem,” Ahluwalia said at an ICRIER event on Tuesday.
Many political parties have spoken about reverting to the Old Pension Scheme. Congress has already reverted to the Old Pension Scheme in Rajasthan and Chhattisgarh, and AAP has said it would do the same in Punjab. Under OPS, pension to government employees at the Centre as well as states was fixed at 50 per cent of the last drawn basic pay. A new system of New Pension Scheme came into effect for those joining government service from January 1, 2004, wherein defined contribution comprised 10 per cent of the basic salary and dearness allowance by the employee under Tier 1 and a matching contribution by the government (later raised to 14 per cent).
In July, Prime Minister Narendra Modi spoke against political parties promoting a culture of freebies, calling them “revdi”, to win votes. His remarks triggered a public debate with parties of the Opposition, especially the AAP and DMK, accusing the PM of targeting welfare schemes and state subsidies promised by non-BJP parties. The Election Commission said political parties should lay out the cost of the freebies they promise and how they plan to finance them if voted to power. A petition was made in the Supreme Court, which proposed formation of a committee to suggest ways to deal with the issue.
Speaking about growth prospects, Ahluwalia said that India needs to grow at 8 per cent but it is unlikely to clock average 8 per cent GDP growth rate for the next 20 or 30 years. India should get out of the notion that in the long term growth will take place only because of spillover effects, he said. “…we have to get out of the notion that we will only grow because of spillover effects. That was true when the West was three-fourths of the world’s GDP. They are not three-fourths of world’s GDP but they are half and nobody thinks they have a sustainable growth rate of more than 2 per cent. So when the IMF says the world will grow at 3 per cent, what it means is that other (countries) are going to grow at more, so from our point of view the spillover effects are not just going to be from the United States or Europe, the spillover effects are from all the other places that are going to grow, certainly Asia in my view,” he said.
Sajjid Z Chinoy, chief India economist at JP Morgan and Part-Time Member in the Prime Minister’s Economic Advisory Council (EAC-PM), said over the last 30 years our average growth rates have almost been 7 per cent and that no emerging market of India’s size has grown at 7 or 8 per cent for a decade or more without strong export growth. In the next 9-12 months, India will have to focus on macroeconomic stability, he said. “We have to ensure that the twin deficits, current account deficit and fiscal deficit, are brought back to sustainable levels…the government is using a variety of instruments like reserves, exchange rate, monetary policy fiscal policy…I don’t think there is a crisis coming in the next six months because India has built sufficient reserves. Despite what we have run down, our reserves are nine months of imports, one-and-half times the gross financing requirements, so there is no 2013 moment,” he added.
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