It seems easier for the government to get money from the salaried class, ordinary professionals and the unorganised sector than from corporates. This was evident from its Friday diktat that deprives working people, single women, senior citizens and others of a little extra money by cutting interest rates on Public Provident Fund, National Savings Certificates and the Kisan Vikas Patra.
This comes soon after the March 18 order taxing 60 per cent withdrawals from the Employees Provident Fund, which was shelved after a huge outcry. All this is to help inefficient state-owned banks get deposits that they find difficult as they can’t compete with the existing small savings rates. One now expects banks to cut interest rates on deposits and fixed deposits any time soon.
The PPF interest rate was cut from 8.7 per cent to 8.1 per cent, Kisan Vikas Patra from 8.7 per cent to 7.8 per cent and NSC will give a 8.1 per cent return after five years compared to 8.5 per cent now. The new rate for Sukanya Samriddhi for girl children has been slashed from 9.2 per cent to 8.6 per cent. All this is despite Prime Minister Narendra Modi’s much-hyped campaign for the girl child.
All these savings instruments are under the finance ministry, so the government is entitled to do whatever it thinks fit to boost its dwindling resource base. Its promise to get back to India crores of rupees lying in overseas tax havens has failed miserably; so has crores of rupees in subsidies given to the corporate sector (Rs 70,000 crores) and the rich under various tax concessions in this Budget.
On the PPF issue, there is a view that the interest rate cut could have been softened if it was graded according to age, so that senior citizens and others in a similar situation aren’t made to suffer. RBI governor Raghuram Rajan and some others are propagating the myth that inflation rates are down and so savers aren’t really losing out. This is a facetious argument in defence of this “anti-savers” step. Even if one accepts this line of defence, the fact is that while the wholesale price index is trending downwards, the all-India consumer price index has remained at a high, which is also a cause of concern for the RBI.
Housing, healthcare, transport and communications have all been going up, and the rupee’s purchasing price is going down. In this scenario, given the total lack of social security in this country, to attack people’s savings is reprehensible and perhaps a dangerous step. There is still time till April for the government to soften the latest blow to people’s savings, if not shelve the diktat altogether like the earlier one.
