New Delhi: Government needs to soon begin building a pension net for employees working in the private sector to avoid bearing the heavy fiscal burden of providing minimum sustenance to those who end up having no pension at all, Crisil Research said on Tuesday.
As per its study, there are nearly 100 million people aged over 60 in India today, and that number will triple to 300 million by 2050.
"Time to build pension net for millions. Fiscal burden of pensions can be 3.4 per cent to 4.1 per cent of GDP by 2030.
"...Every fifth citizen will be a sexagenarian compared with every twelfth now. The worry is that most of them will be financially insecure in their sunset years if a social security net doesn't get built starting right now," it said.
If a large number of the old end up having no pension by 2030, the government will have to bear the heavy fiscal burden of providing minimum sustenance to them, it said.
"A multi-fold increase in pension coverage to private sector workforce is therefore an imperative," it added.
"With the focus on India's demographic dividend, the fiscal cost of ageing is not at the forefront of discussion. However, unless addressed, this cost can be onerous in coming decades," said Roopa Kudva, Managing Director & CEO, CRISIL in a release.
Government employees who joined joining after 2004 are covered under the defined contribution formula of the National Pension System.
"...The government's pension liability on account of these employees will decline to 0.7 percent of GDP by 2050 from 2.2 percent of GDP currently. The problem, however, lies in the private sector," Crisil Research said.
It said the fiscal burden of pension from 3.4-4.1 percent of GDP in 2030 is high, while the central government spends 3-3.4 percent of GDP on education and just over 1 per cent of GDP on medical and public health, water supply and sanitation.
Therefore, the government will have to facilitate access to pension plans for a huge section of the private-sector workforce to avert fiscal stress, and it will have to complement this by incentivising retirement savings, it added.
"India is not the only country set to witness a steep increase in old-age dependency. Indeed, the proportion of its old people will be less than those of several countries and also the world average in 2030.
"But the rise from where we stand today will be steep, hence the need to act fast," said Dharmakirti Joshi, Chief Economist, Crisil.
