NPS adoption by govt sector at 5 month high in August, shows NSO data

Earlier, 85,586 new subscribers had joined the NPS in March 2023

Adoption of the National Pension System (NPS) by employees of central and state governments increased to a five-month high in August, signalling accelerated fresh formal hirings in the public sector.

The latest NPS data released by the National Statistical Office (NSO) on Wednesday showed that the number of new monthly subscribers under the central and state government components of the NPS collectively increased by 22 per cent to 57,399 in August. It was 47,039 in July.

Earlier, 85,586 new subscribers had joined the NPS in March. 

The Centre has mandated the NPS for all its new employees. So, analysts believe the monthly subscription figures are a proxy for new employment generation by the central government.

However, since a few Opposition-ruled states like Rajasthan, Chhattisgarh, Himachal Pradesh, Jharkhand, and Punjab, had announced a return to the Old Pension Scheme (OPS), thereby abandoning NPS, it cannot be used as an exact metric to gauge hirings at the state level.

Under the central component, 17,092 new subscribers joined the NPS in August compared to 14,511 in July. Meanwhile, 40,307 new subscribers joined the NPS in August under the state component, up from 32,528 in July.  

The share of young subscribers belonging to the 18-28 age group, who reflect the robustness of the job market, however, came down to 43.3 per cent in August (24,835) from 44.4 per cent (20,892) in July. 

Mukesh Anand, assistant professor at the National Institute of Public Finance and Policy (NIPFP), said perhaps the increase in new subscribers in August may not entirely be due to fresh hirings. It could be due to an increase in Tier-II or voluntary accounts under the NPS as employees tend to take the benefit of tax rebates and other incentives under it.

The spike seen in new subscribers in August comes in the wake of the decline seen in formal employment in the same month as new monthly subscriptions under the Employee Provident Fund (EPF) fell to a five-month low of 925,984 in August from 1.06 million in July. 

Meanwhile, the number of new subscribers under the corporate component almost halved to 13,829 in August from 29,333 in July.  

This comprises either voluntary subscribers or mainly employees of central and state public sector undertakings along with those in the private sector.

Managed by the Pension Fund Regulatory and Development Authority (PFRDA), the NPS is designed on a defined contribution basis. Here, both the subscriber and the employer contribute an equal amount to a person’s account.

It was made mandatory for all new central government employees from January 1, 2004, except the armed forces. Thus, the NPS data can be used as a proxy to gauge the number of new jobs created under the central government.