Economists and fiscal experts warn that reverting to the Old Pension Scheme would be a significant step backward for India's fiscal health. The primary concern is the massive, unfunded liability that such a system creates, which would place an unsustainable burden on future budgets. Unlike the current National Pension System, which is fully funded through contributions, the old model relies on current tax revenues to pay for past retirees, effectively passing the bill to future generations of taxpayers.
Critics argue that the fiscal space required to fund a return to the old system would inevitably come at the expense of critical public investments. If a large portion of the national budget is locked into fixed pension payments, the government would have less flexibility to fund infrastructure projects, healthcare, education, and defense modernization. This trade-off could hinder long-term economic growth and reduce the country's ability to respond to future crises.
Moreover, the global trend in pension reform has been toward sustainability and away from defined-benefit models that are vulnerable to demographic shifts. As life expectancy increases, the cost of maintaining a guaranteed pension system rises exponentially. By moving away from the market-linked system, the government would be ignoring these demographic realities and creating a structural deficit that could lead to credit rating downgrades and increased borrowing costs.
Instead of abandoning the current system, critics suggest that the government should focus on refining the National Pension System to improve returns and transparency. They argue that accountability requires making decisions that are fiscally responsible, even when they are politically unpopular. A return to the old system would be a short-term political fix that ignores the long-term economic consequences for the entire nation.