To that end, we could create a universal retirement account (URAs) for every child at birth, administered through the Employees’ Provident Fund Organisation and invested entirely in low-cost Indian equity index funds, with an annual government contribution of ₹1,500 from birth through age six. The account would remain locked until age 60, after which withdrawals would be limited to, say, 4 per cent annually in order to preserve real principal, assuming long-term real returns in the vicinity of 4 per cent.
The corpus would be inheritable, with nominated beneficiaries in the event of premature death, and it would be open to voluntary additions at any stage by parents, grandparents, employers, state governments, philanthropic institutions, or the individual later in life. The public contribution would establish the base layer; the URA itself would function as a permanent retirement vehicle into which additional savings could flow over time. Crucially, these accounts would be fully exempt from taxation, allowing compounding to operate without leakage across six decades.
The arithmetic is simple. India has around 25 million births each year. At ₹1,500 per child, each year’s birth cohort would cost about ₹3,750 crore. Because eligibility runs from age zero through six, seven cohorts would be funded simultaneously once the programme is fully phased in, resulting in a steady state annual outlay of about ₹26,250 crore. During the first seven years, expenditure would rise incrementally as each new cohort is added; by the end of year seven, cumulative government contributions would total roughly ₹1.05 trillion before accounting for investment returns.
For the child, seven annual contributions of ₹1,500, compounded at 4 per cent real rate until age 60 would accumulate to approximately ₹1,00,000 in today’s purchasing power. That corpus sustains withdrawals of about ₹4,000 per year in real terms under a 4 per cent rule, provided long-term returns remain near that level. The contribution from the state is modest in nominal terms; the long-term compounding is what generates scale.
Within the first decade, assuming 4 per cent real compounding and no withdrawals, total assets under management would approach ₹2.2 trillion. The EPFO’s current equity allocation is in the range of ₹2.7 to ₹3 trillion, so within 10 years, the child accounts would represent a substantial additional stream of long duration domestic equity capital without overwhelming market capacity.
Over a longer time horizon, the accumulated stock becomes more consequential. If the annual contribution is indexed to per capita income and both per capita income and the portfolio earn roughly 4 per cent in real terms over the long run, then the accumulated corpus scales with the economy, it would grow to about 10-15 per cent of gross domestic product (GDP), rather than shrinking as GDP grows. A pool of this magnitude, entirely index allocated and structurally long-horizon, would represent one of the largest sources of patient domestic equity capital in the country.
The broader policy rationale extends beyond retirement arithmetic. Redistribution in India has often taken the form of immediate transfers, designed to smooth consumption in the present. Those instruments have their place. Yet over time, long-term security is shaped less by episodic cash flows and more by balance sheets. An URA that compounds over half a century strengthens financial resilience in a way that annual transfers cannot. The objective here is not simply to move income across households in a given year, but to embed asset ownership across the population over generations. Such a structure would, in practical terms, move India closer to an ownership society in which every citizen, regardless of parental income or occupational trajectory, holds a small but permanent stake in the performance of the economy. As markets deepen and enterprises grow, that stake compounds automatically. The psychological effect of knowing that one participates in the country’s long-term growth is dramatic and it will also broaden the shareholder base of Indian enterprise.
The institutional architecture required is already in place. The EPFO manages large retirement pools within an established regulatory framework. What would matter here is disciplined simplicity: Low-cost index allocation, strict lock in until age 60, transparent governance, and clear beneficiary nomination. Over five or six decades, fee discipline and consistency will matter more than tactical adjustments.
In districts such as my own, Hazaribagh, where household balance sheets remain fragile and savings are episodic, the presence of a URA established at birth alters the starting point for the next generation. It does not eliminate inequality, nor does it substitute for education, employment, or infrastructure. It does, however, ensure that participation in India’s future prosperity is anchored in ownership rather than solely in wages.
The annual fiscal cost is contained relative to overall expenditure, the decade-scale financial footprint is manageable within existing capital markets, and the generational accumulation becomes substantial without requiring large transfers at any single point in time. Designing redistribution to enhance long-term security rather than only immediate consumption is consistent with India’s broader developmental trajectory.
In a period when capital, rather than labour, will play an increasingly central role in economic returns, embedding universal capital ownership from birth could prove to be a transformational initiative.
The author is president, Everstone Group, and visiting professor in practice at LSE. He is a former Union minister and Lok Sabha MP. The views are personal
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