India Must Shift Household Savings to Long-Term Pension Assets: CEA
Chief Economic Adviser V Anantha Nageswaran urges Indian households to move savings into long-term pension products to ensure retirement security.
Chief Economic Adviser (CEA) V Anantha Nageswaran has highlighted a critical gap in India's financial landscape, stating that the nation needs to encourage households to redirect a larger portion of their savings toward long-term pension products. Speaking at an event commemorating NPS Diwas 2025-26, Nageswaran noted that while Indians are becoming more comfortable with market-linked investments, pension and insurance assets still constitute a disproportionately small segment of total household savings.
The Shift in Saving Patterns
According to the CEA, the way Indian citizens save has undergone a significant transformation. There has been a notable surge in market-linked instruments, yet this enthusiasm has not translated into a proportional increase in retirement-focused savings. He observed that while savers are increasingly willing to embrace market risks, they are not yet committing capital for the long durations required for a secure retirement.
“The Indian saver has shown a willingness to accept market risk or so we would like to believe. What the saver has not yet done at scale is to commit savings for a longer tenure,” Nageswaran remarked, pointing out that optimizing for the long term remains a challenge for many.
Key Data: The Changing Face of Savings
Drawing on data from the Economic Survey, the CEA provided a clear picture of how Indian financial habits are evolving:
- Equity and Mutual Funds: The share in annual household savings jumped from approximately 2 per cent in 2011-12 to nearly 15 per cent in 2024-25.
- Bank Deposits: The dominance of traditional bank deposits has declined from over 58 per cent to roughly 35 per cent.
- SIP Growth: Monthly Systematic Investment Plan (SIP) flows have skyrocketed from under Rs 4,000 crore in 2016-17 to exceeding Rs 28,000 crore during the first eight months of 2025-26.
- The Stagnant Segment: Despite these shifts, the proportion of pension and insurance assets within household savings has remained virtually unchanged between 2018-19 and 2023-24.
Closing the Global Pension Gap
The scale of the opportunity for growth is immense. Nageswaran pointed out that India's total pension assets currently stand at about 17 per cent of the country's GDP. In contrast, peer countries in the OECD maintain pension assets at levels of at least 80 per cent of their GDP, suggesting a massive room for expansion in the Indian market.
To bridge this gap, the CEA suggested that India could follow the blueprint laid out by the Unified Payments Interface (UPI). He argued that technology and simplified products can drive financial inclusion even before widespread financial literacy is achieved. "Financial inclusion can indeed precede financial literacy. Nobody took a course on payment systems before using it," he noted.
Innovations in Retirement Planning
To make pension products more accessible, Nageswaran emphasized the importance of:
- Simpler Products: Reducing the need for savers to become financial experts to participate.
- Technological Integration: Allowing small contributions via mobile phones.
- Localized Support: Utilizing agents and initiatives like Pension Sakhis and Tatkal NPS to reach more people.
Beyond the Corpus: Ensuring Steady Income
The CEA concluded by stressing that building a large pool of money is only half the battle. The ultimate goal of a pension system is to ensure that an individual has a reliable stream of income throughout their retirement.
“A corpus at 60 years of age is only half the job. The other half is converting it into a steady income that lasts for as long as the person lives and one that keeps pace with prices or inflation,” Nageswaran said. He emphasized that future focus must remain on developing effective retirement-income schemes, drawdown mechanisms, and assured payout structures.