Page 49 - Banking Finance May 2025

ARTICLE

Financial Impact and Market Effects Infrastructure Development

Budget Impact Projections The UPS has specific requirements for infrastructure
investment:
The three pension systems have different effects on
5% of funds allocated to infrastructure projects
government finances:
Participation in government infrastructure initiatives
Time Period OPS NPS UPS`
(% of GDP) (% of GDP) (% of GDP) Support for infrastructure debt through guarantees
Short-term 1.8% 0.9% 1.2% Financing state infrastructure through special bonds
(5 years)
Medium-term 3.4% 0.8% 1.4% Income Replacement Analysis
(15 years) How effectively each system replaces pre-retirement
Long-term 5.7% 0.7% 1.8% income:
(30 years)
Income Group OPS NPS UPS
Investment in Financial Markets Lowest 20% 65% 35-45% 55-60%
The combined assets of NPS and UPS now exceed ?12 trillion 2nd Group 60% 40-50% 52-58%
(approximately $144 billion), significantly impacting India's 3rd Group 55% 45-55% 50-56%
financial markets: 4th Group 50% 48-58% 48-54%
Market Area NPS Investment UPS Investment Highest 20% 40% 50-60% 45-50%
Government Rs. 4.2 trillion Rs. 1.2 trillion
Bonds This shows that the UPS provides better income replacement
for lower-income workers compared to the NPS, while being
Corporate Bonds Rs. 2.8 trillion Rs. 0.4 trillion
more fiscally sustainable than the OPS.
Stock Market Rs. 3.2 trillion Rs. 0.2 trillion
Alternative Rs. 0.1 trillion Rs. 0.05 trillion UPS Implementation Process
Investments The UPS rollout was structured in phases:
1. Phase I (July-September 2024): Central government
This investment has helped:
ministries
Create benchmark interest rates across different time
2. Phase II (October-December 2024): Central public
periods
sector organizations
Improve liquidity in corporate debt
3. Phase III (January-March 2025): Participating state
Increase availability of long-term investment options
governments
Reduce risk premiums
4. Phase IV (April 2025 onward): Optional for private
employers
Key implementation components included:

Transfer of existing NPS accounts with options to
enhance benefits

Special provisions for employees who joined before 2004
Digital systems integration
Comprehensive employee communication programs

UPS in Global Context

44 | 2025 | MAY | BANKING FINANCE