2,431 research outputs found

    Pension Reforms in India: Myth, Reality and Policy Choices

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    Escalating costs of the pension system is forcing the Indian Government to reevaluate the formal programmes that provide social security to employees. The government has so far received three official reports (namely, OASIS, IRDA and Bhattacharya), which have examined the issue and suggested several measures to provide a safety net to the aging population. This paper examines the recommendations made in these reports and analyses the potential effects of them. It is organized around five policy questions: 1. Should the reformed system create individual (funded defined-contribution) accounts, or should it remain a single collective fund with a defined-benefit formula? The changeover involves a larger public policy choice issue: who should ultimately bear the risk? Should employees/retirees shoulder those risks alone arising from variations in asset yields and unexpected changes in longevity, or should these risks be shared more broadly across participants, if not society? Choice would depend upon to which group the individual belongs. Financially successful people may believe in individual ownership and choice, while low wage earners may want assured returns because they do not have other resources to fall back upon. Unfortunately most Indians, unlike those in many other countries, are in the latter category which cannot bear any risk, more so in the old age. 2. If individual accounts are adopted, should the reformed system move toward private and decentralized collection of contributions, management of investments, and payment of annuities, or should these functions be administered by a public agency? In privately managed funds, associated problems would be intermediation costs, agency problem (principal-agent fiduciary relationship), and greatly increased costs to administer the plan. Several studies across the world have shown that periodic fee may look deceptively low but, over longer time horizons, the cumulative effect can be dramatic, sometimes reducing the benefits by 30 to 50 per cent. 3. Should fund managers of retirement savings be allowed to invest in a diversified portfolio that includes stocks and private bonds? In recent years equity investments, particularly index investing, have become a favoured strategy. Index funds are subject to tracking error, and being loaded with few big stocks, there are much higher risks in index investing than people perceive. Over the period, real annual return on index funds may be more, but people retire only once. Equity markets are highly volatile and go through long periods of feasts and famine. Guarantees would have to be provided in the form of minimum return or providing minimum basic pension on retirement. World bank studies show that government ends up acquiring conjectural liabilities wherever a pension system based on private providers is mandated. How would that be different from the present system where a government agency (EPFO) provides retirement benefits? 4. Should the government move toward advance funding of its pension obligations for its employees, or should these obligations continue to be financed on pay-as-you-go basis? Studies have shown that a simultaneous implementation of funded, diversified, individual accounts is not a "free lunch" once you properly account for existing unfounded obligations and risk. The Bhattacharya Committees estimates show that the government would have to pay out more on account of pensions to its employees for the next 38 years before the new scheme starts showing reduced government expenditure. These amounts do not include the tax foregone by the government on the employees contribution. Several assumptions have been made about the scheme, which the committee hopes would remain valid and that the future governments would behave responsibly. The proposed scheme does not consider intermediation costs and agency risks; in fact, the committee presumes that agents would behave more responsibly than principals. 5. What should be the level of government fiscal support in the form of tax subsidy, foregone tax collections, grants, administrative costs incurred by its agencies, and level of assumed contingent liabilities in case the government guarantees minimum pension? The crucial question is: how much and to whom is this subsidy accruing? Are beneficiaries of the proposed system the ones who need subsidy? Tax treatment of pension is a critical policy choice. A generous tax treatment may promote savings but may be costly in terms of revenue foregone. Apparently, an exercise in balancing is necessary. The priority should, therefore, be putting in place a policy vision and road map with specific goals in relation to pre-determined milestones. These should include a tax financed and means-tested system for lower income groups. If government cannot afford it, then it has no moral or political justification to even consider providing further tax benefits to privileged income groups. If there are no government funds for the first pillar in the World Bank recommended multipillar system, the third pillar should remain out of policy discussions. Emphasis should be on strengthening the second pillar. Suggested reforms neither enhance efficiency nor make the social security system more equitable. It would only privatize the gains while costs and risk for the government would increase considerably. It would only help well-off segment of society in availing more tax concessions. Present problem in the government pension system is due to successive governments behaving like Santa Clauses ignoring the cost to exchequer. Fund managers would not be able to solve these problems. Specific fiscal and other measures for implementing a feasible and viable pension system in Indian conditions have also been suggested in the paper.

    On the Distribution of the Sum of n Non-Identically Distributed Uniform Random Variables

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    The distribution of the sum of independent identically distributed uniform random variables is well-known. However, it is sometimes necessary to analyze data which have been drawn from different uniform distributions. By inverting the characteristic function, we derive explicit formulae for the distribution of the sum of n non-identically distributed uniform random variables in both the continuous and the discrete case. The results, though involved, have a certain elegance. As examples, we derive from our general formulae some special cases which have appeared in the literature.Comment: 20 page

    IIMs Expansion - Myths, Realities and Policy Choices

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    This paper suggests a roadmap for IIM Ahmedabad to increase its intake substantially with available resources in its flagship ‘Post Graduate Program in Management’ (PGP equivalent to MBA). Solutions for other IIMs should be similar as all share similar programs, ethos and culture; differences would be only in details. The suggested measures are: a) Restructure Fellow Program in Management (FPM) – IIMs Ph.D. Program Currently 22 equivalents of faculty resources are used in teaching 10-15 FPM students in the second year alone. Only 6-8 students graduate every year. To justify efficient use of available faculty resource - FPM intake either should be increased four-fold (to 60 from present 15), or merge all streams and award ‘Fellow in Management’ with specialization at thesis stage. This is very common in many universities facing similar constraints. The first option would increase supply of faculty for hire in future (should have been done lone time ago); the second would immediately release 15 faculty for PGP expansion. b) Review expansion plans of PGP for Executives (PGPx). There is not much international about its student body or academic offering. Admitted students are mostly NRIs who are seeking leverages with PGP brand for better placement abroad after getting the cheapest possible MBA in the world. Moreover, it is heavily subsidized Rs. 3 lakh per participant (Rs. 2 crore for current batch) just to recover direct cost. c) Require faculty who migrated to centers/groups (like health, energy etc.) to have same teaching load as others. All these centers are leveraging on PGP brand and concerned faculty involved must fulfill their obligations to PGP. d) At present two dorms on new campus are kept for non-regular events (cultural and intellectual). These can house 60 students on regular basis. Temporary arrangements can be planned for non-regular events. e) There is no justification for offering married accommodation for one year program on campus, particularly when IIMs practice a ‘pressure cooker’ approach of teaching. Families with children are distraction. Two students can easily be put in newly built apartments accommodating additional 100 participants. To sum it up, IIMA can increase its PGP intake substantially by a) better utilization of physical infrastructure b) better faculty time management by restructuring programs and active faculty recruitment in deficit areas; and c) by defining its priorities more sharply. IIMs PGP product is the best and why dilute it by allowing remotely related activities to have free ride on it? The paper also covers issues like autonomy, increasing role of alumni and almost extinct faculty governance. It is not concerned with ‘OBC reservation policy’.

    Pulsar Scintillation and the Local Bubble

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    We present here the results from an extensive scintillation study of twenty pulsars in the dispersion measure (DM) range 3 - 35 pc cm^-3 caried out using the Ooty Radio Telescope (ORT) at 327 MHz, to investigate the distribution of ionized material in the local interstellar medium. Observations were made during the period January 1993 to August 1995, in which the dynamic scintillation spectra of these pulsars were regularly monitored over 10 - 90 epochs spanning 100 days. Reliable and accurate estimates of strengths of scattering have been deduced from the scintillation parameters averaged out for their long-term fluctuations arising from refractive scintillation (RISS) effects. Our analysis reveals several anomalies in the scattering strength, which suggest tht the distribution of scattering material in the Solar neighborhood is not uniform. We have modelled these anomalous scattering effects in terms of inhomogeneities in the distribution of electron dnsity fluctuations in the local interstellar medium (LISM). Our model suggests the presence of a low density bubble surrounded by a shell of much higher density fluctuations. We are able to put constraints on geometrical and scattering properties of such a structure, and find it to be morphologically similar to the Local Bubble known from other studies.Comment: 35 pages, 12 figure
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