Expenditure on pension has emerged as one of the major components of the Committed Expenditure of the Centre and states in recent years. In fact, it was higher than the ‘salary and wages’ expenditure of the Centre and three states – including Gujarat – during 2019-20, according to official data.
Incidentally, the Old Pension Scheme (OPS) has figured as a prominent poll promise in the Himachal Pradesh and Gujarat Assembly elections, even triggering debates beyond the political arena. Two Congress-ruled states – Rajasthan and Chhattisgarh – have already decided to implement the OPS, while the party has promised to restore it in Gujarat and Himachal Pradesh if it comes to power.
According to data available with the Comptroller and Auditor General of India (CAG), the Centre’s total Committed Expenditure was Rs 9.78 lakh crore during 2019-20, which included an expenditure of Rs 1.39 lakh crore on ‘salary and wages’, Rs 1.83 lakh crore on pensions and Rs 6.55 lakh crore on ‘interest payments and servicing of debts’.
The Centre’s total Committed Expenditure accounted for 37 per cent of its total revenue expenditure of Rs 26.15 lakh crore in 2019-20.
“The Committed Expenditure in respect of the Union Government consists of 67 per cent on Interest Payment and Servicing of Debt. The remaining 19 per cent and 14 per cent expenditure constituted the expenditure on Pensions and Salary and Wages respectively. It is apparent that expenditure on pensions is more than the expenditure on salaries and wages,” reads the CAG report titled ‘Union and State Finances at A Glance’ for 2019-20.
According to the report, the Centre’s pension bill was 132 per cent of its expenditure on salary and wages in 2019-20, the last year for which comparable data for the Centre and states is available. This was just ahead of the Covid-19 outbreak in India in 2020.
The pension bill also exceeded the salary and wages expenditure across three states – Gujarat, Karnataka and West Bengal – in 2019-20.
In Gujarat, the pension bill (Rs 17,663 crore) was 159 per cent of the expenditure on salary and wages (Rs 11,126 crore). Similarly, Karnataka’s pension bill (Rs 18,404 crore) was 126 per cent of the state’s expenditure on salary and wages (Rs 14,573 crore). And for West Bengal, the pension bill (Rs 17,462 crore) was 103 per cent of the expenditure on salary and wages (Rs 16,915 crore).
The data shows that the combined pension bill of 30 states and Union Territories, for which comparable data is available, stood at Rs 3.38 lakh crore in 2019-20, which was 61.82 per cent of their combined expenditure (Rs 5.47 lakh crore) on salary and wages. Across five states – Uttar Pradesh, Bihar, Maharashtra, Tamil Nadu and Odisha – the pension bill accounted for over two-third of their expenditure on salary and wages.
The expenditure on pension is one of the key components of the government’s Committed Expenditure. The other two are the expenditure on salary and wages and interest payment and servicing of debt. If the Committed Expenditure is higher, it means that the government has lesser flexibility to determine the purpose for which revenue expenditure is to be incurred.
During 2019-20, the total Committed Expenditure of all states stood at Rs 12.38 lakh crore (Rs 5.47 lakh crore on salary and wages; Rs 3.52 lakh crore on interest payment and servicing of debt; and Rs 3.38 lakh crore on pension), which was almost half – 45 per cent – of their combined revenue expenditure of Rs 27.41 lakh crore.
The expenditure on pension in Rajasthan – where the Congress-led state government has decided to implement OPS – was Rs 20,761 crore in 2019-20. This is almost 42.7 per cent of its expenditure (Rs 48,577 crore) on salary and wages. Similarly, Chhattisgarh’s pension bill (Rs 6,638 crore) was 30.62 per cent of the state’s salary and wage expenditure (Rs 21,672 crore).
However, in Himachal Pradesh, where elections recently concluded, the pension bill (Rs 5,490 crore) was 47 per cent of the salary and wage expenditure of Rs 11,477crore.
The latest edition of the Handbook of Statistics on Indian states, released by Reserve Bank of India on November 19, shows that the combined pension expenditure of all states and UTs has doubled to Rs 3.45 lakh crore in 2019-20 from Rs 1.63 lakh crore in 2013-14. In fact, the pension expenditure further increased to Rs 3.68 lakh crore in 2020-21 (revised estimate) and was budgeted at a higher at Rs 4.06 lakh crore for 2021-22 (BE).