Even as the Agnipath scheme continues to face challenges on multiple fronts, let’s take a step back and ask: what are some lessons for public policy from this saga?
Lesson 1: Data secrecy makes reform difficult
In their book In Service of the Republic, economists Vijay Kelkar and Ajay Shah identify secrecy as a deterrent to building State capacity.
Further, the book proposes a seven-stage ideal-type pipeline for effecting a public policy change. The first stage of this pipeline is “the establishment of the statistical system”. Highlighting the importance of this stage, the authors write, “Facts need to be systematically captured. Without facts, the entire downstream process breaks down.” This precisely is the problem with the entire debate over defence pension—the absence of reliable, foundational data.
Believe it or not, the government does not release defence pension data beyond the aggregate numbers listed in budget documents. For instance, we still don’t know how this Rs 1.15 trillion amount is split between officers, non-officers, and defence civilians. Forget pensions, we don’t even have an authoritative source in the public domain for the exact number of personnel in our armed forces. There are good reasons to keep info on warfare capability, state of ammunition, etc., a secret. But there’s no reason to hide foundational data on defence personnel and pension.
This severe lack of facts is counterproductive for the government itself. Without credible information, myths abound, distrust grows, and the cognitive maps of stakeholders get misaligned. The need for reforms is never widely appreciated, and the status quo becomes desirable, howsoever damaging it may be.
Take an example. An oft-repeated argument against defence pension reform is to blame defence civilians. Through images circulated on WhatsApp groups, many in the armed forces community are convinced that defence civilians account for more than 45 per cent of the total defence pension expenditure. And whenever the issue of defence pension comes up, they cite this data point.
However, there is no reliable information for this claim. Based on the last available data from 2016-17, defence civilians’ pension was only 20 per cent of the total defence pension expenditure. And even if the pension outflow for defence civilians were somewhat higher, new defence civilians are now part of the National Pension System (NPS) since 2004. The issue has already been managed over the long term. But in the absence of reliable data, myths continue to be peddled. Calls for reforms become zero-sum contests between defence civilians and uniformed personnel or between developmental and defence expenditure.
Had the government come out with a position paper on pensions, allowances, and personnel, the chances of getting people on board for reforms would have been higher.
Also read: Agnipath an ember that can consume India. Why it’s an invitation to civil war
Lesson 2: Ex-ante fiscal projections a must
Seemingly small changes in pension policies can have hard-to-reverse, long-term detrimental effects. For instance, an executive decision in 1976 increased a 10-year service term for a non-officer soldier to 17 years. This move meant every soldier qualified for a pension by default on retirement. This decision was the primary reason for a steady rise in pension spending. Increasing life expectancy (a welcome development) and the One Rank One Pension scheme further contributed toward the pension expenditure rising from Rs 228 crore in FY81 to Rs 1.15 lakh crore in FY21.
Here’s why we need an Independent Fiscal Council, which can help people and politicians understand the financial consequences of such plans before execution. While India has an institution (the Comptroller and Accountant General) to audit policies that are already in action, no organisation makes an independent financial evaluation of government policies before they receive approval. The 13th, 14th and 15th Finance Commissions have highlighted this institutional gap.
This absence results in tall promises from parties’ electoral manifestos becoming government policies without regard to fiscal sustainability.
To take this idea further, Rajya Sabha MP Sujeet Kumar, Vedant Monger, and Vikram Vennelakanti have proposed a law that mandates executive decisions pass through a legislation impact analysis ex-ante and a post-implementation assessment in Parliament.
Also read: India’s increasingly-violent young cohort is its biggest national security problem
Lesson 3: Pension reforms are like six-day test matches
Pension reforms have a reputation for being notoriously tricky across the world. Reducing employees’ pensions while they are in service is not possible. More importantly, such a move would be an immoral breach of trust by the State. Hence, all pension reform options can only tackle future employees, saving on the expenditure that would have been incurred after they retire. Today’s reforms can at best contain the rise in spending a couple of decades later, when these yet-to-be-hired employees retire. Hence, it is imperative to exercise caution on pension policies at the inception stage.
Regardless of what happens with the Agnipath scheme, these three meta-lessons are helpful for future attempts at reform.
(Edited by Zoya Bhatti)