The study highlights that there is a need to intermediate greater amounts of pension funds into infrastructure sector.
India’s pension fund market is set to reach about Rs 20 lakh crore by 2015 from the current Rs 15.4 lakh crore, says Associated Chambers of Commerce and Industry of India (ASSOCHAM). The pension fund market in India is growing at 10% according to a study titled ‘Financial Markets: Time for Next Generation Reforms’ released by ASSOCHAM.
The study shows that over 30 crore working age employees in the country lack formal pensions. Over 80 % of India's working population is in the unorganized sector without the regular salary and benefits of formal employers.
“There is a huge scope for growth in India’s PF market owing to a low existing coverage and large workforce in the unorganized sector, vast majority of which has no pension which also provides massive opportunities for the private sector and foreign players to enter the pension market in India,” said D.S. Rawat, secretary general of ASSOCHAM. “Large scale reforms are required to ease pressure on the treasury, to provide for a social security net for growing numbers of senior citizens as well as a growing workforce as only about 12 per cent of the working population in India is covered by some form of retirement benefit scheme”.
The study highlights that there is a need to intermediate greater amounts of pension funds into infrastructure sector and foreign direct investment (FDI) could also help.
“FDI in pension funds would further increase the volume of assets that can be invested into infrastructure and help in realizing the infrastructure needs of India,” said Mr Rawat. “The long term income streams, stability, predictable cash flows, low default rates, diversification and the overall benefits to the society at large are certain characteristics of infra projects that assist in attracting investments from pension funds.”
It says that long-term investors such as pension and insurance funds have had a limited presence in Indian market due to regulatory restrictions.
Pension products account for over 30 per cent of the total insurance market.
