Atal Pension Yojana: Effect of Inflation And Time Value of Money

Abstract

Economic Growth and Development of a nation is highly influenced by the financial well-being as well as improved standard of living of its citizens. To ensure a stable income for Indian Citizens after retirement, the Government of India has introduced Atal Pension Yojana in 2015-16 Budget. APY provides a defined guaranteed pension depending on the contributions made by the subscriber towards the scheme.APY could emerge as the mostpopular social security scheme under the NPS System. The present paperanalyzesthe amount of money an investor would receive from AtalPension Yojana after adjusting for the time value of money.The study also examines its benefits, contributions and the current trend among the public towards the scheme.The study uses secondary data. Our findings indicate that, as inflation will erode the value of pension amount over time, the pension under Atal Pension Yojana may be too small to cover the cost of living. The Government must index the subscriber contribution to inflation in order to prevent the pension fund of low-income consumers from depleting over time. If the design flaws of APY are addressed, even the most vulnerable will get benefited.