India: New pension scheme for minors seeks to ensure financial security

NPS Vatsalya can be initiated while the child is under the age of 18

By HP Ranina

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Published: Tue 1 Oct 2024, 7:41 PM

Last updated: Tue 1 Oct 2024, 7:48 PM

Question: My grandson was recently born in India. I want to send some funds every month to his account. Is there any scheme under which the funds would multiply and be available to him during his life?

Answer: A new pension scheme is now available for the benefit of minors. A pension account can be opened for all citizens below the age of 18 in the name of the minor and operated by a parent or guardian.

The account can be opened in banks, post offices, with pension funds and through an online platform (e-NPS). Minimum contribution to this account is Rs1,000 per annum and there is no limit on the maximum amount which can be contributed every year. After the child attains the age of 18, the plan can be converted by the beneficiary into a normal NPS account.

In short, NPS Vatsalya is a pension scheme which can be initiated while the child is under the age of 18. This scheme is a significant step to promote long term financial planning and security. It is expected to inculcate the habit of savings among young subscribers which would enable them to build capital for higher education, business investments and ultimately for retirement. Hence, this scheme is based on the principle of intergenerational equity by providing cover from the young to the middle aged and the old. Banks have been instructed to ensure effective implementation and outreach of this pension scheme. Small amounts invested from a young age could yield a substantial corpus over the years by harnessing the power of compounding.

Question: There has been a dip in the GDP growth rate in India during the April-June quarter. Can this trend be reversed considering the prevailing global scenario and the fragile geopolitical condition?

Answer: The lower industrial production growth of 4.8 per cent and GDP growth rate of 6.7 per cent during April-June quarter of this financial year is a cause for concern. However, this dip is on account of a fall in government spending during this quarter due to parliamentary elections being held at the time. This trend is expected to reverse and higher growth rates are expected during the next three quarters of this fiscal year.

The global situation may however impact India and other emerging markets. The Governor of the Reserve Bank of India in a recent speech given in Singapore highlighted the unprecedented levels of global debt which would have a spillover effect on other countries triggering financial instability. According to him, the geopolitical risks will increase volatility in asset prices and capital flows and disrupt economic integration. He specified that the risks pertain to supply chain strains, weaponisation of finance, trade restrictions, financial sanctions, trade disputes, oil price volatility, etc. The Governor emphasised that geopolitical tensions on account of war may impact even those countries which are not involved in conflicts. Further, there are potential risks associated with the proliferation of non-banks with the rapid growth of private credit. Therefore, there is a need for regulators worldwide to closely monitor these developments and implement necessary safeguards.

H. P. Ranina is a practising lawyer, specialising in tax and exchange management laws of India.

Question: As an engineer, I have been involved in implementation of various projects. As several infrastructure projects are under implementation in India, I am tempted to go back and start a consultancy using my experience. I want to know whether there are advanced programmes conducted by technical institutes in India for which I can enrol to improve my skills before I start my consultancy.

Answer: The current business landscape is as project driven as it is dynamic. Traditional project management certification courses are available in India which focus on standardized methodologies and tools. However, IITs have devised advanced programmes in strategic project management for experienced professionals like you who wish to enhance project management capabilities. These programmes cover a wide range of subjects including strategic alignment, project planning, risk management and stakeholder engagement. Participants of these programmes are given a deep understanding of project management principles with valuable perspectives and practical guidance to enable them to advise on complex projects. Evolving market dynamics, technological disruptions and regulatory requirements result in delayed project delivery leading to cost overruns. The advanced project management courses help the professional to successfully execute strategies within fixed budgets and timelines. Participants are taught to leverage technology to drive project innovation, streamline processes and enhance project delivery capabilities.

HP. Ranina is a practising lawyer, specialising in corporate and tax laws of India.