A few weeks ago, the Indian government beat one of its hastiest retreats. It announced announced Livemint Govt rolls back move to cut small savings rates Read more deep interest rate cuts in small savings schemes on 31 March, only to roll everything back on the morning of 1 April. Media reports pointed to an early morning directive from the Prime Minister’s Office for the reversal. Finance Minister Nirmala Sitharaman called it an “oversight” “oversight” The Ken Small savings, big retreat Read more . But for the many millions of Indians who use these schemes to fund their retirement, it was just another nail in a coffin that has begun to shrink before their eyes.

Retirement planning isn’t something that most Indians actively think about, especially in their 20s and 30s—which is also, ironically, one of the best times to begin thinking about saving for the long haul. The earlier the better. But according to a PGIM India-Nielsen India survey in December 2019, 51% of the 3103 Indians surveyed had no retirement plan. Around 89% of respondents said they were unprepared for retirement.

It’s a ticking time bomb. Indians are simply not putting enough money into their retirement kitty. Studies and surveys over the years have showcased the emergency. Take, for instance, the Project OASIS (Old Age Social and Income Security Project) report of 2000.

Commissioned by the government, the report highlighted the post-retirement income problem in detail. It also paved the way for the introduction of the National Pension System (NPS) in 2004—a landmark move towards pension security in the country. But while NPS has brought some progress, there is still a long way to go—it has only 42.4 million subscribers as of March 2020, with a corpus of about Rs 5,80,000 crore ($77 billion).

The Covid sledgehammer has only escalated the public pension crisis.

Over the past year or so, sharp rate cuts by the Reserve Bank of India (RBI) to tackle the Covid-driven growth slowdown has slashed the returns slashed the returns Business Standard State Bank of India slashes FD rate by 40 bps Read more on bank deposits. Making matters worse is the recent jump in inflation. Low rates, coupled with fast-rising prices, have meant that real rates real rates real rates It is an interest rate that reflects the actual rate of return an investor gets once inflation is factored in have turned negative turned negative Livemint Depositors eye negative returns on term deposits Read more on most bank fixed deposits.

AUTHOR

Anand Kalyanaraman

A certified Chartered Accountant, Anand chose to pack the power of numbers with words when he left a career of seven years in accounting, putting together MIS reports, and investment research to enter journalism. Before joining The Ken, Anand was Deputy Editor at The Hindu BusinessLine, a newspaper he worked at for 11 years.

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