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Letter to BS: Government treats pensions as part of current expenditure

Unfunded pension liabilities are a major consideration in evaluating a business entity's net worth

Business Standard 

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A K Bhattacharya has rightly drawn out attention to the salaries and expenditure of the Government of India in “Keeping the wage bill in check” (December 24). His observation that “are likely to stay higher than salaries for at least two more decades” is most alarming, even as it is absolutely true. More and more retirees live longer, due to improved standards of living and better health care. And the number of retirees may soon exceed those in active service. Since are based on the last salary drawn, and are linked to the of the government employees, the burden will keep rising.

The world over, unfunded are a major consideration in evaluating a business entity’s net worth when mergers and takeovers are concerned. All our governments’ are unfunded, which would be otherwise a negative mark against them. Governments treat pensions also a part of the current expenditure as they do the salary bills. That practice is fraught with economic danger in the not too distant future.

Shreekant Sambrani, Baroda

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First Published: Wed, December 26 2018. 21:30 IST