This refers to your editorial “The pension deficit” (October 23). The observation — “the government tends to postpone expenditure to the extent possible and this is not restricted to one particular area. This practice must end because it doesn’t help achieve anything” — is a revealing statement that needs immediate attention of everyone who has anything to do with financial accounting in India. The introduction of the National Pension System or NPS (originally New Pension Scheme, December 2003) itself has an accounting jugglery background. When the government pension schemes were following a “pay as you go” accounting practice and unfunded liability of such schemes rose to crores of rupees, which attracted criticism, the government of India (GOI) discontinued defined benefit pension scheme for its employees (except defence personnel) prospectively and introduced NPS.
For decades now, the Centre and state governments have been manipulating fiscal deficit figures with immunity by postponing payment of dues and receiving advance payments from organisations like the Reserve Bank of India. Diverting funds under direction from institutions like Life Insurance Corporation of India and delaying payments to statutory bodies and public sector undertakings have become the order of the day. The GOI and the state governments need to think of a one-time cleansing of the national balance sheet by obtaining legislative approval for a higher fiscal deficit. Transparency in accounting will boost institutional morale leading to a rise in public trust in the government and the financial system. A welcome by-product will be the rise in domestic/household savings and their mainstreaming. The negative impact of a higher fiscal deficit can be got over by preparing and publishing a national balance sheet accounting for the total amount of domestic assets and liabilities held with the government, corporates, individuals and all organisations.
M G Warrier, Mumbai
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