Indian Express Editorial Summary

Editorial Topic : Unified Pension Scheme (UPS) and Its Implications

 GS-3 Mains Exam : Economy

Revision Notes

Context & Background

• Union Cabinet Approval: The Union Cabinet approved the Unified Pension Scheme (UPS) for Union government employees in 2024, signaling a significant shift in pension reforms.
• Maharashtra’s Adoption: Following the Union Cabinet’s decision, the Maharashtra government also adopted the UPS framework for its state employees, marking the beginning of broader adoption across states.

Cooperative Federalism

• Positive Development:
  • The adoption of the UPS by states represents a constructive move towards cooperative federalism.
  • Tax Devolution Increase: The Centre has already increased tax devolution to states from 32% to 42%, reinforcing fiscal federalism.
  • Incentives for Capital Spending: States are being incentivized to increase capital spending and improve transparency in their fiscal management.
  • Transparency in Fiscal Situations: The UPS encourages states to be more transparent about their fiscal conditions, aligning with broader financial discipline initiatives.

Benefits of the Unified Pension Scheme (UPS)

• Certainty for Pensioners:
  • The UPS assures pensioners 50% of the average drawn basic pay in the last 12 months of service as their pension, providing financial predictability post-retirement.
  • Contributory Character Maintained: Despite the guaranteed pension, the contributory nature of the pension system remains intact, where employees continue to contribute to their pensions during their service.
  • Funded Nature Preserved: The government continues to set aside funds in advance to ensure future pension obligations are met, maintaining the scheme’s financial sustainability.

Challenges with the Old Pension Scheme (OPS)

• Reversion to OPS by States:
  • In recent years, states like Rajasthan, Chhattisgarh, Jharkhand, Punjab, and Himachal Pradesh reverted to the Old Pension Scheme (OPS), which was in place before 2003.
  • Fiscal Risks Highlighted by RBI: The Reserve Bank of India (RBI) raised alarms in its September 2023 bulletin about the fiscal risks associated with reverting to OPS.
  • Increased Pension Burden: The RBI projected that the pension burden under OPS would be 4.5 times higher than under the National Pension System (NPS), making OPS fiscally unsustainable in the long run.
  • Immediate Cost Reduction Misleading: While OPS might temporarily reduce pension outgo for states, it would lead to significant long-term financial strain.

Balancing State Finances

• Longstanding Concern: Balancing the need for social welfare with fiscal responsibility has been a persistent challenge for states.
• Creating Opportunities: States need to manage finances in a way that creates opportunities for citizens while ensuring funds are available for welfare measures for disadvantaged groups.
• Transparency in Borrowings:
  • To ensure transparency and sustainability, borrowings by state public sector companies, corporations, and special purpose vehicles (SPVs) that are serviced by state budgets are now treated as state borrowings.
  • This measure ensures that states account for all their liabilities, preventing hidden fiscal burdens.

Conclusion: The UPS as a Win-Win Solution

• Predictability for Retirees: The UPS provides a predictable pension framework for retired government employees, recognizing their lifelong contribution to nation-building.
• Sustainability and Contribution: The scheme retains the contributory nature of the pension system and ensures that pension obligations are pre-funded, maintaining fiscal discipline.
• Broader Financial Strategy: The UPS should be viewed as part of a broader strategy that includes boosting capital investment in states, enhancing transparency in fiscal management, and strengthening state finances.
• Opportunity for States: By adopting the UPS, states have the opportunity to improve their financial health while ensuring social security for their employees, making it a balanced and sustainable approach to pension reform.

 

 

 

 

Indian Express Editorial Summary

Editorial Topic : Growing US-India Defence Ties and Recent Agreements

 GS-2 Mains Exam : IR

Revision Notes

Context & Background

• Recent Agreements: India and the US signed two significant defence agreements in 2024: the Security of Supply Arrangement (SOSA) and a Memorandum of Agreement regarding the Assignment of Liaison Officers. These agreements are the latest in a series of bilateral military agreements that have strengthened defence cooperation over the past decade.

Details of the Two New Agreements

• Security of Supply Arrangement (SOSA):
  • Reciprocal Priority Support: SOSA ensures that the US and India will provide each other with reciprocal priority support for goods and services essential for national defence.
  • Global Context: India is the 18th country to become a SOSA partner with the US, highlighting the strategic importance of the US-India defence relationship.
• Memorandum of Agreement on Liaison Officers:
  • Enhancing Information Sharing: This agreement is a progression from earlier decisions to increase information-sharing between the two nations.
  • Strategic Posting: Indian armed forces officers will now be posted in key strategic US Commands, further deepening military cooperation.

Cooperation Milestones

• 2013: Joint US-India Declaration on Defence Cooperation laid the groundwork for a strengthened defence relationship.
• 2015: Framework for the US-India Defence Relationship was established, outlining the strategic vision for bilateral defence ties.
• 2023 Roadmap:
  • SOSA and RDP Agreement: The 2023 roadmap envisioned the conclusion of the SOSA and the Research, Development, and Production (RDP) Agreement.
  • Priority Areas: Focus areas included Intelligence, Surveillance, and Reconnaissance (ISR), Undersea Domain Awareness, Air Combat and Support, Aero engines, munitions systems, and mobility.

Technological and Defence Industry Cooperation

• iCET Initiative:
  • Critical and Emerging Technology (iCET): In January 2023, the US-India initiative on Critical and Emerging Technology (iCET) was discussed to expand the strategic technology partnership and defence industrial cooperation.
• INDUS-X:
  • Defence Innovation Bridge: The India-US Defence Acceleration Ecosystem (INDUS-X) took forward the commitment to build a defence innovation bridge under iCET.

Foundational Defence Agreements

• 2002:
  • General Security of Military Information Agreement (GSOMIA): This agreement facilitated the sharing of military information between the two nations.
• 2019:
  • Industrial Security Annex (ISA): An annex to GSOMIA, ISA was signed to facilitate the exchange of classified information between the defence industries of India and the US.
• 2016:
  • Logistics Exchange Memorandum of Agreement (LEMOA): LEMOA established the terms for reciprocal logistic support, supplies, and services between the two militaries.
• 2018:
  • Communications Compatibility and Security Agreement (COMCASA): COMCASA, an India-specific version of CISMOA, secured military communication and enabled India to access advanced defence systems and optimally utilise its existing US-origin platforms.
• 2020:
  • Basic Exchange and Cooperation Agreement (BECA): BECA aimed to facilitate the sharing of military information, including maps, nautical charts, and other unclassified imagery and data.

Other Military Deals and Sales

• 2012:
  • Defence Trade and Technology Initiative (DTTI): The DTTI agreement was signed to promote industrial cooperation and defence trade between India and the US.
• 2016:
  • Major Defence Partner Designation: The US designated India as a Major Defence Partner, marking a significant elevation in bilateral defence ties.
• 2018:
  • Strategic Trade Authorisation (STA) Tier 1 Status: India was elevated to STA tier 1 status, allowing it licence-free access to a range of military and dual-use technologies regulated by the US Department of Commerce.
• Memorandum of Intent: A memorandum was signed between the US Defence Innovation Unit (DIU) and the Indian Defence Innovation Organization-Innovation for Defence Excellence (DIO-iDEX), promoting joint innovation.

Military Hardware and Weapon Procurements

• MH-60R Seahawk: India procured MH-60R Seahawk multirole helicopters to enhance its naval capabilities.
• Sig Sauer Rifles: Advanced rifles were procured to modernize the Indian armed forces.
• M777 Howitzers: India acquired M777 ultra-light howitzers for its artillery regiments.

Way Forward

• Rajnath Singh’s Visit (2024):
  • Priority Co-Production Projects: During Defence Minister Rajnath Singh’s four-day official visit, India and the US agreed to advance priority co-production projects, including jet engines, unmanned platforms, munitions, and ground mobility systems under the 2023 US-India Roadmap for Defence Industrial Cooperation.
• Strategic Depth: These ongoing developments signify a deepening of the US-India defence partnership, with a focus on co-production, technological collaboration, and shared strategic interests.