INDIA - India's expenditure on civil service pension schemes risks spiralling out of control, according to the World Bank.
World Bank senior pensions economist Robert Palacios said civil service pensions spending was the fastest growing single expenditure item in most state government budgets.
“For the country as a whole, the share of GDP devoted to this spending has about doubled in the last 15 years,” Palacios said, and added that nothing had yet been done to tackle the issue.
An International Monetary Fund report published earlier this year showed long term fiscal developments across India had been disappointing. A 60% salary increase, introduced almost 10 years ago, led to a sharp increase in pensions. This rise in pensions expenditure has been carried forward to this day.
According to Palacios, India was not the only emerging market troubled by its civil servant pensions expenditure. He said the burden of civil service pension schemes has also been mounting in Brazil.
“One tenth of available revenue is used to finance civil service pensions,” Palacios noted.
Although the issue has been a target for reform for almost a decade, minimal progress has been made in this regard.
Raul Velloso, one of Brazil’s experts in public spending, confirmed there was an "urgent need" to change the government’s approach to expenditure.
Currently, pensions for public employees took precedence over investment in infrastructure and this had to change, Velloso said.
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