New Delhi

Pension savings, being among the longest-duration and most patient forms of capital, can play a key role in building infrastructure and supporting India's journey towards Viksit Bharat while generating returns aligned with long-term liabilities, Chief Economic Adviser V Anantha Nageswaran said on Tuesday.

A deep and well-governed pension pool can contribute to the creation of a developed India by supporting growth-oriented investments while ensuring liability-aware returns for subscribers, he said while addressing an event organised by Pension Fund Regulatory and Development Authority (PFRDA).

Nageswaran highlighted that pension funds globally have faced funding challenges, particularly in the past when low interest rates pushed investors towards riskier assets.

"The funding gap has long plagued Western pension funds and narrowed somewhat as interest rates moved away from the zero-flow environment. However, a subtle risk has emerged," he said.

Pension funds have increasingly moved towards assets that are risky, illiquid and sensitive to macroeconomic changes.

"Gold is the clearest example, and for a country like ours, it carries balance of payments consequences that a domestic liability fund should really tackle," he said.

Nageswaran also expressed concern over the growing dominance of short-term investors in financial markets, saying even traditionally long-horizon investors have seen their investment horizons shrink.

Chasing higher returns at the cost of pension promises was a risk that pension systems cannot afford, he said.

A developed nation should not be judged only by economic output but also by the financial security and dignity it provides to senior citizens, he added.

READ MORE: Fauzia Dastango's journey of reviving the art of storytelling

"Viksit Bharat is not just a number on a national income chart. A country can host high output and still leave its old people anxious. The truer measure of a developed society is whether security and dignity in old age are broadly shared," he said.