Law | Economics | Policy
Mukul Asher has an article India's innovative pension plan in the latest Far Eastern Economic Review.
Interesting thta Mukul Asher uses the word "innovative" to describe the NPS.First, it mandates that 40% of accumulated balance must be used to purchace an annuity. Nowhere in the world are there efficient annuity markets. Not even in Chile. Why is the government pusing workers into a market fraught with market failuresSecondly, the Chilean model would have been better, since it given workers a wider portfolio choice and better risk management. Plus, private accounts would jumpstart the nascant corporate debt market and add to the depth of domestic markets. Most importantly, NPS offers no scope for scaling up social security for workers in organized sector. But NPS is much better than the defined benefit plan operational currently.
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