State’s Underfunding of Pension in India

Debasmita Panigrahi, Rohit Gupta and Prabina Rajib

The IUP Journal of Public Finance, 2008, vol. VI, issue 2, 7-20

Abstract: Every state has to balance its revenue and expenditure in order to meet its assigned budgetary requirements. Pension is also a part of the states’ expenditure, and since there was the concept of defined benefit scheme till the year 2004, the entire liability of pension expenditure was solely the concern of the government. This has given rise to a greater amount of fiscal deficit, and in order to curb this deficit and maintain a balanced budget status, the government underfunds the pension payment made to its employees. Therefore, this paper examines the extent to which long-term debt and balanced budget requirement affect the funding of pension by states. The results indicate that the long-term debt and balanced budget requirement are inversely related to pension funding status, and are consistent with the proposition that state governments meet their debt and balanced budget requirements by cutting short on pension funding.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjpf:v:06:y:2008:i:2:p:7-20

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