NPS adoption by CPSEs decreases 42.5% to a five-month low in May

Adoption of the National Pension System (NPS) by employees of the central government and central public sector enterprises (CPSEs) declined to a five-month low in May, signalling a slowdown in fresh formal hirings by the public sector.

The latest NPS data released by the National Statistical Office on Tuesday showed that the number of new monthly subscribers under the central component of the NPS decreased by 42.5 per cent to 10,081 in May, from 17,459 in April 2023.

Earlier, 9,705 new subscribers had joined the NPS in December 2022.

Since the Centre has mandated the NPS for all of its new employees, analysts believe the monthly subscription figures can be considered as a proxy for new employment generation by the central government and CPSEs.

Of the total 10,081 new subscribers who joined the NPS in May under the central government and central public sector undertakings, the share of young subscribers (aged 18-28 years) fell to nearly 57 per cent in May, from 74 per cent in the preceding month. This is crucial because subscribers in the 18-28 age group are usually first-timers in the labour market, and this metric reflects its robustness.

However, the share of women subscribers improved marginally to 22.2 per cent, from 21.9 per cent in April.

The decline in new NPS subscribers in May comes in the wake of the decline seen in the new Employee Provident Fund subscribers in May, as the number of new monthly subscribers declined marginally by 1 per cent to 883,176 in May, from 891,974 in April.

Besides, the NPS data also shows that the number of new subscribers under states fell for the second consecutive month to 30,821 in May, from 38,909 in April.

Earlier, a few Opposition-ruled states, including Rajasthan, Chhattisgarh, Himachal Pradesh, Jharkhand, and Punjab, had announced a return to the Old Pension Scheme, thereby abandoning NPS. Hence, it cannot be used as an exact metric to gauge hiring at the state level.

Moreover, the corporate component under the NPS saw a 50 per cent increase in the number of new subscribers to 16,793 in May, from 11,166 in April.

Mukesh Anand, assistant professor at the National Institute of Public Finance and Policy, said the spike in new subscribers under the corporate component could be due to an increase in tier II or voluntary accounts under the NPS as a number of employees tend to take advantage of tax rebates and other incentives provided under it as they migrate from other social security instruments.

Managed by the Pension Fund Regulatory and Development Authority, the NPS is designed on a defined contribution basis, wherein both the subscriber and the employer contribute an equal amount to his/her account.

It was made mandatory for all new central government employees from January 1, 2004, except the Armed Forces and, thus, the NPS data can be used as a proxy to gauge the number of new jobs created under the central government.