In the upcoming tenure of the Modi 3.0 coalition government, the BJP’s ally JD(U) has reportedly called for a reassessment of the Agnipath short-service scheme for defense personnel, a move that could potentially impact the national budget’s defense pension allocations.
Introduced during the previous term of the Narendra Modi administration, the Agnipath scheme targets youth aged 17.5-21, enlisting them for a four-year term with the aim of modernizing the armed forces, fostering a youthful profile, and mitigating long-term financial obligations related to pensions and benefits.
Under the scheme, termed Agniveers, recruits receive a ‘Seva Nidhi’ package upon completion of their tenure, consisting of contributions from both themselves and the government along with accrued interest. A quarter of Agniveers are absorbed into the regular armed forces, while the remainder return to civilian life with the Seva Nidhi package and enhanced employability through skills training.
The rationale behind the Agnipath scheme lies in its potential to curb escalating defense pension costs, a significant concern given India’s already substantial defense spending. Traditional recruitment entails lengthier service periods and higher cumulative salary expenses compared to the Agnipath scheme’s shorter tenure, which aims to optimize training costs over the four-year period.
While the correlation between the reduction in defense pension allocations and the Agnipath scheme is not definitive, recent data indicates government efforts to alleviate the burden in this area. However, discontinuing the scheme could undermine endeavors to create a financially sustainable model for the armed forces, potentially leading to increased pension expenditures.
The government’s target to reduce the fiscal deficit to below 4.5 percent of GDP by FY26 further underscores the importance of managing defense pension liabilities. Reverting to the traditional recruitment model would likely result in higher long-term pension obligations, impacting budget allocations and necessitating increased revenue generation or borrowing.