The government on Monday sought approval from Parliament to frontloading ₹7,000 crore in the fund for Unified Pension Scheme (UPS). This is part of over ₹51,000 crore of fresh expenditure proposal moved as Supplementary Demands for Grants (SDG) tabled in the Lok Sabha.
“We are pre-funding it (UPS). This is a liability coming up for the government and we are placing it upfront,” a senior Finance Ministry official told businessline. UPS has been introduced as an option under the National Pension System (NPS) for Central government employees. This aims to provide an assured payout after their retirement. It is a ‘fund-based’ payout system which relies on the regular and timely accumulation and investment of applicable contributions (from both the employee and the Central government)) for grant of monthly payout to the retiree. It will be operational from April 1, 2025.
With the provision of ₹7,000 crore, government’s liability for the first year of NPS is done. Government expect as many as 23 lakh Central government employees can benefit from UPS. At the time of Cabinet approval last year, it was said that the rollout of UPS will entail an additional outgo of ₹6,250 crore for the Centre in first year and arrears of ₹800 crore in first year which is 2025-26.
Supplementary demands for grants
Meanwhile, the government sought Parliament nod to spend a net additional ₹51,462.86 crore in the current financial year ending March, with a large chunk going towards pension and subsidy fertilizer. The gross additional spending sought by the government is over ₹6.78 lakh crore, of which ₹6.27 lakh crore would be matched by savings and receipts.
The additional expenditure includes ₹14,100 crore to the Department of Fertilizers, including subsidies for urea and P&K fertilizer. An additional allocation of ₹13,449 crore has been provided for the pension of government employees, including ₹7,000 crore towards UPS.
The total spending also includes a defence pension of ₹8,476 crore and ₹5,322 crore to the Department of Telecommunications. An additional ₹2,186 crore funds have been allocated to the agriculture department and ₹3,722 crore to the Union Territory of Jammu & Kashmir to meet for meeting additional expenditure to meet the resource gap.
Commenting on the second SDG, Aditi Nayar, Chief Economist with ICRA, said the latest one is slightly higher than the net cash outgo of ₹44,000 crore in the first batch, but is nevertheless quite modest, in line with our own expectations. “We believe that expenditure savings by other heads, would provide a cushion against the aforesaid net cash outgo in the second batch and prevent any sharp overshooting in GoI’s total expenditure in FY2025 vis-à-vis the revised target,”she said
The nominal GDP estimate for FY2025 has been revised upwards by 2.1 per cent in the Second Advance Estimate vis-à-vis the First Advance Estimate, which provides the headroom to contain the fiscal deficit to GDP ratio at 4.8 per cent in FY2025 even if the additional spending pushes up the fiscal deficit number above the RE of ₹15.7 lakh crore. Overall, “we expect the fiscal deficit to print at 4.7 per cent of GDP in FY2025, slightly lower than the RE for the fiscal,” she said.