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No way forward for the NPS' middle layer

Despite a range of good suggestions, the Bajpai Committee doesn't have a solution for the NPS' most pressing problem

Some days ago, the report of the Bajpai committee on the National Pension System (NPS) was made public. The committee, which was set up in September last year, made a host of recommendations for fixing the myriad problems that have shown up in all aspects of the NPS. Over the last decade, the NPS has had some successes and some failures, and different people think of the scheme either as a winner or a loser depending on which aspect they consider to be important.

The core of the NPS is its role as a replacement for Governments' (state and central) internally funded pension system, thereby getting rid of the future pension liability. Obviously, the NPS has succeeded in doing that. Whether employees' money is being invested in a way that is best for them is a separate question, and one the Bajpai committee has tackled.

By design, the NPS has two audiences--government employees and everyone else. However, in reality the 'everyone else' is composed of three distinct types of
potential members. There are those who already use the formal financial system, are likely to already have some superannuation solution and have exposure to information about the NPS.

At the other end of the scale, at the bottom of the pyramid, there are those who are likely to get covered by the PMJDY and related schemes like the Atal Pension Yojana. In the middle lies what has been the black hole of the NPS. The huge mass of Indians who are self-employed or employed in unorganised workplaces were meant to be one of the major targets of the NPS. And yet, this has all the potential of becoming the NPS' black hole. They have to be brought into the net individually, which is not very attractive for any commercial entity. If any commercially motivated seller of financial products makes the effort to access this market, it's not going to waste the profit potential by selling a low-rent product like the NPS.