India's old-age pensions have increasingly become a State-funded enterprise with a token central share. Critically examine the implications for equity and fiscal federalism.

Under the Indira Gandhi National Old Age Pension Scheme (IGNOAPS), part of the National Social Assistance Programme (NSAP), the Centre pays only ₹200 a month to people aged 60–79 and ₹500 to those aged 80 and above [2]. Between 2017 and 2021, States/UTs spent ₹1,09,573 crore on top of the Centre's ₹34,432 crore [4]. Pensions are now mostly paid for by the States. This has clear gains but also serious costs.

Implications for equity

• Gain: State top-ups give people a more dignified income. Bihar raised its pension from ₹400 to ₹1,100 for the elderly, widows and persons with disabilities, and pays it by DBT [1].
• Gain: Wider coverage. On average, States/UTs added about 1.82 crore beneficiaries each year beyond the central BPL list [4].
• Cost: Unequal treatment across States. Top-ups range from ₹50 to ₹5,700 a month [2], so a poor elderly person's pension depends on where they live.
• Cost: Shrinking real value. The central amount has not been revised since 2012, even though the Standing Committee on Rural Development asked for this more than once [4].
• Cost: Weak delivery. CAG found ineligible people being paid and pensions not paid every month, because existing beneficiaries were not re-verified [4].

Implications for fiscal federalism

• Gain: Cooperative federalism. The Centre sets a common framework, and States are encouraged to add at least an equal top-up suited to local needs [3].
• Cost: The Centre designs, the States pay. The Centre still fixes BPL eligibility, age bands and the scheme's name. Yet in Bihar the central ₹200 is only about 18% of the ₹1,100 paid [1][2].
• Cost: Pressure on poorer States. States that depend on central transfers take on a fixed yearly cost. This squeezes capital spending and invites the "freebies" label.
• Cost: Fund management. CAG flagged NSAP funds being moved to other uses and released late [4].

State top-ups have made old-age pensions wider and larger, but they have also created unequal outcomes across States and an imbalance between who designs the scheme and who pays for it. The way forward is to:

• revise the central share and link it to inflation, as the Standing Committee recommended;
• set a national minimum pension;
• re-verify beneficiaries every year;
• keep NSAP funds in separate accounts.

A pension that the Centre and States fund fairly would better meet Article 41's promise of public help in old age and SDG 1.3 on social protection.