Most employee unions have supported the move, which is one of the BJP’s many efforts to consolidate its base through new welfare programmes. (PTI)
The balancing act between appeasing around 23 lakh government employees and potential voters and maintaining the reform momentum could prove to be a risky gamble as the government approaches the next elections.
On the eve of Janmashtami, the Narendra Modi government has launched a financial assistance package for central government employees and the middle class who want to join the civil service. The move is a deliberate attempt to consolidate support of a key constituency – central government employees. But is Modi 3.0 taking a significant risk and jeopardising his ambitious reform programme by turning government employees into labharthis (beneficiaries)?
While the opposition and some unions themselves are unhappy with the financial and pension benefits announced by the government, most unions support this move, which is just one of the many attempts by the BJP to consolidate its base through new social programs.
The financial stimulus is planned and designed to appeal to a significant portion of the electorate, but it could also pose a challenge to the government’s broader vision for economic reform. By prioritizing immediate financial relief, the government could undermine its long-term strategy of implementing structural changes that may be unpopular in the short term but are necessary for sustainable growth.
The balancing act between appeasing some 2.3 million government employees and potential voters and maintaining the momentum of reforms could prove to be a risky gamble with a view to the next elections.
Budget discipline or election promises?
The long-term financial sustainability of the scheme has been questioned by some economists. Senior economist and IIM (C) professor emeritus Anindya Sen said the sustainability of UPS needs to be kept in mind. “The transition from NPS to a defined contribution scheme instead of a market-linked scheme is a response to a significant demographic shift. As the number of pensioners grows and the working population – between 20 and 60 years – shrinks, the tax base required to sustain pension obligations is shrinking.” He also pointed out that despite the potential benefits of a defined contribution scheme, public scepticism remains high due to its untested nature.
Sen also said that by broadening the tax base, the government could stabilize its finances without overburdening the shrinking workforce.
Second, while the programme is likely to find immediate support among central government officials – a crucial and large constituency for the government – it may cause discontent among other groups, particularly a section of the tax-paying middle class and those employed in the private sector or state governments who may feel excluded from these benefits.
Third, some state governments are expected to adopt such programs for their employees, which could put some of the debt-ridden states in even greater financial difficulty. This could lead to political tensions and calls for similar programs in other sectors, further complicating the government’s financial management.
Experts therefore warn that by returning to a more generous pension plan, the government may be undermining its own reform agenda and signaling a turn to populist measures in the run-up to the elections.
