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According to a report from the Reserve Bank of India, the potential return to the Old Pension Scheme (OPS) by certain states poses a significant financial burden, hindering their ability to engage in capital expenditure for fostering economic growth.
The RBI’s State Finances: A Study of Budgets of 2023-24, released on Monday, emphasized that any shift back to OPS represents a regressive step, jeopardizing the gains from previous reforms and jeopardizing the interests of future generations.
The report highlighted that the resurgence of the Old Pension Scheme (OPS) in a few states and indications of others heading in the same direction could strain state finances and curtail their capability to pursue growth-centric capital expenditures.
Under OPS, a defined benefit (DB) scheme, state government employees receive a pension set at 50% of their last drawn salary after retirement. In contrast, the NPS is a defined contribution (DC) scheme, where employees contribute 10% of their basic salary and dearness allowances, matched by a contribution from the state government.
