A COMPARATIVE STUDY OF THE NATIONAL PENSION SCHEME (NPS) AND THE OLD PENSION SCHEME (OPS): ASSESSING THEIR FISCAL SUSTAINABILITY AND IMPACT ON ECONOMIC GROWTH IN INDIA

The National Pension Scheme (NPS) and the Old Pension Scheme (OPS) in India are thoroughly examined in this report, along with their respective fiscal sustainability and wider effects on economic growth. The study explores the key design distinctions between these two pension models—NPS, a defined-contribution, market-linked system, and OPS, a defined-benefit, unfunded system—and looks at the significant ramifications of these differences. A crucial conflict between immediate political concerns and long-term economic prudence is highlighted by the ongoing discussion, especially the decision by a number of Indian states to switch back to OPS. According to key findings, OPS presents an unsustainable fiscal burden by its very nature. Government capital expenditure is severely constrained by this sizeable liability, which has the crowding-out effect of impeding long-term economic growth. On the other hand, NPS actively supports infrastructure development and capital market deepening, which promotes economic growth, by mobilizing long-term savings and directing them into a variety of market instruments. An ongoing policy iteration to strike a balance between guaranteed benefits and fiscal viability is reflected in the creation of the Unified Pension Scheme (UPS). The analysis comes to the conclusion that a strong commitment to pension reforms that give priority to funded, sustainable models is necessary to uphold fiscal restraint and promote strong economic growth. Avoiding a mass switch back to OPS, bolstering state coffers, expanding the appeal and reach of NPS, and pursuing ongoing actuarial evaluations within a comprehensive social security framework are the main policy recommendations. Keywords: National Pension Scheme, Old Pension Scheme, Fiscal Sustainability, Economic Growth, Financial burden, GDP, etc.