'Using Verbal Sophistry To Hide Facts': FM Sitharaman Hits Back At Congress Over Criticism Of Atal Pension Yojana

Union Finance Minister Nirmala Sitharaman rebuked Congress leader Jairam Ramesh over his remarks on Atal Pension Yojana as he highlighted alleged shortcomings of the flagship scheme.

File Photo of Union Finance Minister Nirmala Sitharaman and senior Congress leader Jairam Ramesh

Source : PTI

Union Finance Minister Nirmala Sitharaman on Tuesday rebuked Congress leader Jairam Ramesh for his critique of the Modi government's flagship scheme, Atal Pension Yojana (APY), after he termed it a "poorly-designed" initiative. Ramesh's remarks came after a media report claimed that a significant number of subscribers withdrew from the scheme due to unauthorised account openings. He also pointed to over 80% of subscribers being in the lowest slab of the scheme and remarked how the "return is not very attractive".

In a post on X, Jairam Ramesh cited the report and criticised the APY stating, "Up to a third of the subscribers to this scheme were enrolled into the scheme without “explicit permission,” by officers seeking to meet their quotas. Nearly 83% of the subscribers are in the lowest slab of Rs. 1,000 pensions, because the monthly contribution for it is low and it goes “unnoticed” by the beneficiaries. For subscribers, the amount of return is not very attractive since it is a fixed income pension, which loses value with rising prices."

The Finance Minister was in Bengaluru on the 24th of March, where she was proclaiming the benefits of the Atal Pension Yojana initiated by the Modi Government as its “flagship social security program.” Just a day later, here’s what emerged:

• Up to a third of the subscribers to… pic.twitter.com/wRewnCA1Nh

— Jairam Ramesh (@Jairam_Ramesh) March 26, 2024

"The “flagship” Atal Pension Yojana is a very poorly-designed scheme, a paper tiger that needs officials to hoodwink and coerce people into participating in it. It’s a fitting representation of the Modi Government’s policymaking: headline management, with few benefits actually reaching the people!" he remarked.

Nirmala Sitharaman Defends Atal Pension Yojana

Sitharaman defended APY, emphasising its focus on providing pensions to unorganised sector workers. She highlighted its guaranteed minimum pension ranging from Rs. 1,000 to Rs. 5,000 per month, depending on contributions.

Regarding the scheme's design, she drew from Nobel laureate Richard Thaler's work on 'Nudge' to explain the opt-out mechanism for premium payments.

"Atal Pension Yojana is designed based on best practice choice architecture to automatically continue the premium payment unless the subscriber opts out. This is a deliberate and beneficial feature which is in the best interest of the subscribers. Instead of requiring people to decide each year to continue, they have to take a decision to discontinue. This makes many of them take the right decision and save for their retirement. Richard Thaler (Nobel prize winner in Economics 2017) and Cass Sunstein (a Professor who worked in the Obama administration) are known for their book ‘Nudge’ which explains the need for proper ‘choice architecture’ in designing public schemes," the Finance Minister stated.

On Atal Pension Yojana, @Jairam_Ramesh known for using verbal sophistry to hide facts, is being malicious or is ignorant of the basic tenets of designing a good pension scheme.

Atal Pension Yojana is designed based on best practice choice architecture to automatically continue… https://t.co/5y6Gn3MBYx

— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) March 26, 2024

She addressed concerns raised by Ramesh regarding the predominance of subscribers in the lowest pension slab, asserting that it demonstrates effective targeting of the scheme towards the intended beneficiaries, "As regards the majority of pension accounts being in the lower slabs, for a subsidised scheme intended for the poor and lower middle class, this is obvious. In fact, it shows the proper targeting of the scheme. If the offtake was at the higher end, that would be surprising!"

Additionally, Sitharaman underscored the scheme's guaranteed minimum return of at least 8%, irrespective of prevailing interest rates. She clarified that the government subsidizes any shortfall in returns to ensure subscribers receive adequate pensions. Sitharaman noted that current returns exceed 8%, further enhancing the attractiveness of the scheme.

"The minimum return under the APY is guaranteed by the GoI to be at least 8%, regardless of prevailing interest rates and returns. This is an attractive guaranteed minimum return. GoI pays a subsidy to PFRDA to make up for any shortfall in actual returns. If higher investment returns are received on the contributions of subscribers of APY, higher pension would be paid to the subscribers: In fact, currently the returns are more than 8%," Sitharaman highlighted.

What Is Atal Pension Yojana

Atal Pension Yojana is a social security scheme aimed at providing a steady income stream to Indian citizens above 18 years who are working in the unorganised sector. Beneficiaries can choose monthly pensions ranging from Rs 1000, Rs 2000, Rs. 3000, Rs 4000, or Rs 5000 based on their contributions. The scheme offers automatic debit facilities and allows annuitisation of corpus amounts after the age of 60.

Under APY, subscribers receive a guaranteed minimum pension ranging from Rs. 1,000 to Rs. 5,000 per month after the age of 60, with provisions for spouses and nominees to receive pension benefits. The scheme targets the poor and unorganised sector workers, providing benefits of a guaranteed pension, spouse benefits, and pension wealth to nominees.