Editorial 1 : A win-win on pension
Context: Union cabinet approves Unified Pension Scheme
Introduction: Soon after the Union Cabinet’s decision to implement the Unified Pension Scheme (UPS) for Union government employees, the Maharashtra government decided to adopt the UPS framework for its employees.
Cooperative Federalism
- The changes in the UPS regime is a positive development for cooperative federalism in addition to measures such as increasing tax devolution to states from 32% to 42%, incentivising states towards capital spending and pushing them to be transparent about their fiscal situation
Benefits of Unified Pension Scheme (UPS)
- It provides more certainty to pensioners by assuring them 50 per cent of the average drawn basic pay in the last 12 months in service as pension.
- This has been done without whittling away the two key pillars of the well-thought-out pension reforms — the contributory character of pensions, wherein employees contribute to their pensions from the salary they receive while they are in service, and its “funded nature” wherein the government sets aside money in advance to pay for future pension provisions.
States reverting to Old Pension Scheme (OPS)
- Over the past few years, several states such as Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh reverted to the Old Pension Scheme (OPS) of the pre-2003 era.
- The implications for this decision and the risk of more states adopting this became so alarming that the RBI released a paper in its bulletin in September 2023 stating that the fiscal cost of reverting to OPS will be enormous as the actual pension burden will increase by around 4.5 times than that of the NPS.
- The paper concluded by stating that “any reversion to OPS by states would be fiscally unsustainable, though it may result in an immediate fall in their pension outgo”.
Balancing State Finances
- Balancing state finances has been a longstanding concern.
- Meeting people’s aspirations for opportunities and creating an enabling environment to meet their potential needs to be balanced with setting aside funds for welfare measures for disadvantaged and vulnerable groups.
- To bring transparency and sustainability in state finances, borrowings by state public sector companies, corporations and special purpose vehicles (SPVs), serviced by state government budgets, were considered as borrowings made by the state.
Conclusion
- The UPS is a win-win
- It provides predictability of pension to retired government employees who have contributed a lifetime of service to nation-building.
- This has been done by retaining the contributory pay and its funding nature.
- The change should be seen as a part of a range of steps which comprises boosting capital investment in states through complementary schemes and introducing transparency in borrowings giving states an opportunity to strengthen their finances.
Editorial 2 : Two new US-India agreements: a short history of growing defence ties
Context: Recent US-India defence agreements
Introduction: India and the US have signed a Security of Supply Arrangement (SOSA) and Memorandum of Agreement regarding the Assignment of Liaison Officers, the latest in a series of bilateral military agreements that have enhanced defence and security cooperation between the two countries over the past decade.
Two new agreements
- SOSA
- Under SOSA, the US and India will provide reciprocal priority support to each other for goods and services that promote national defence.
- India is the 18th SOSA partner of the US.
- MOU ON LIAISON OFFICERS
- The Memorandum of Agreement regarding the Assignment of Liaison Officers is a progression on a decision taken earlier to increase information-sharing between India and the US, and to post Indian armed forces officers in key strategic US Commands.
Cooperation Milestones
- 2013: Joint US-India Declaration on Defence Cooperation
- 2015: Framework for the US-India Defence Relationship
- 2023 Roadmap
- It envisioned the conclusion of SOSA and the RDP Agreement.
- Priority areas of cooperation identified in the roadmap included Intelligence, Surveillance, and Reconnaissance (ISR), Undersea Domain Awareness, Air Combat and Support, including Aero engines, munitions systems, and mobility.
- iCET
- The US-India initiative on Critical and Emerging Technology (iCET) was discussed in Jan 2023 to expand the strategic technology partnership and defence industrial cooperation.
- INDUS-X
- India-US Defence Acceleration Ecosystem (INDUS-X), took forward the commitment to build a defence innovation bridge under iCET.
- Foundational Agreements
- In 2002, India and US signed the General Security of Military Information Agreement (GSOMIA) to facilitate sharing of military information.
- In 2019, the Industrial Security Annex (ISA) to the GSOMIA was signed to facilitate the exchange of classified information between the defence industries of the two countries.
- Logistics Exchange Memorandum of Agreement (LEMOA) of 2016 established the basic terms, conditions, and procedures for reciprocal provision of logistic support, supplies, and services between the two militaries.
- In 2018, the Communications Compatibility and Security Agreement (COMCASA), an India-specific version of the Communications and Information Security Memorandum of Agreement (CISMOA), was signed to secure military communication between the countries, facilitate access to advanced defence systems, and enable India to optimally utilise its existing US-origin platforms.
- Basic Exchange and Cooperation Agreement (BECA) of 2020 aimed to facilitate the sharing of military information including maps, nautical charts, and other unclassified imagery and data.
Other military deals and sales
- In 2012, the Defence Trade and Technology Initiative (DTTI) agreement was signed to promote industrial cooperation and defence trade between the two countries.
- In 2016, the US designated India as a Major Defence Partner.
- In 2018, India was elevated to Strategic Trade Authorisation tier 1 status, which gave it licence-free access to a range of military and dual-use technologies regulated by the US Department of Commerce.
- Memorandum of Intent between the US Defence Innovation Unit (DIU) and the Indian Defence Innovation Organization-Innovation for Defence Excellence (DIO-iDEX).
- Military hardware and weapon procurements
- MH-60R Seahawk multirole helicopters
- Sig Sauer Rifles
- M777 ultra-light howitzers
Way Forward
During Defence Minister Rajnath Singh’s four-day official visit, the partner nations 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.