The implicit pension debt, the net present value of future pension to the existing central and state government employees, is "substantial" compared to the centre's internal public debt at 84.86 per cent of GDP, said the study authored by Guatam Bharadwaj of Invest India Economic Foundation and S S Dave of Centre for Monitoring of Indian Economy.
"It is only a conservative estimate and we have not taken into account the other segments for IPD like pensioners in the central, state and defence forces and the funding gap in the Employees Pension Scheme," Bharadwaj said.
Of the Rs 1,735,527 crore IPD, the future pension outgo for state government employees stands at Rs 1,329,435 crore (Rs 13294.35 billion) or 42.81 per cent of GDP at market prices at Rs 3,105,512 crore (Rs 31055.12 billion) in 2004-05, it said.
The future pension liabilities of the central government employees has been estimated at Rs 406,092 crore (Rs 4060.92 billion) or 13.08 per cent of the GDP.
The study arrived at Rs 406,092 crore (Rs 4060.92 billion) IPD in the central sphere assuming a population of 5,285,523 employees in the age group of 21-60 years.
In the case of states, the study arrived at an IPD of Rs 1,329,435 crore (Rs 13294.35 billion) assuming a population of 18,438,515 employees in the age group of 21-60 years.
"Accurate estimates of India's IPD, both at the national level and at the states level, are important for the purpose of fiscal planning and pension reforms," it said, pointing out that estimates are based in 2004 wages.
The study has been undertaken in view of the traditional defined benefit civil service pension being unfunded, which means the central and state governments have an obligation to pay pensions to their employee, but have not set aside any funds for meeting these obligations.
The study made key assumptions that real wage would grow by two per cent a year and interest rate on government bonds in real terms in the coming decades would be two per cent.
The study also factored in demographic characterisitics of government employees, actuarial aspects embedded in LIC's prices of annuities, the new pension scheme for new recruits in government started in January 2005 and assumptions that future pension payment would be outsourced and that all the existing employees would retire at the age of 60 years.
