Govt announces rollback of decision to cut rates on small savings; Congress takes a jibe: 10 points
Finance minister Nirmala Sitharaman announced on Thursday rolling back of the steep interest cut on small saving schemes such as Public Provident Fund (PPF) and National Savings Certificates (NSC) for the June quarter. Sitharaman said it was an oversight.
The announcement gave ammo to the opposition which quickly attacked the government over the U-turn, saying it was done with elections in "hindsight".
The government routinely announces interest rates for small saving schemes at the end of every quarter.
Here are the latest developments on the government's decision to withdraw the interest rate cut:
- Announcing the rollback, Sitharaman said on Twitter on Thursday morning, "Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn."
- On Wednesday, interest rate on PPF was reduced by 0.7 per cent to 6.4 per cent while NSC was to earn 0.9 per cent less at 5.9 per cent.
- The highest cut of 1.1 per cent was effected in the one-year term deposit. The new rate was brought down to 4.4 per cent as compared to 5.5 per cent.
- Attacking the government, opposition Congress said one can imagine the functioning of the economy when such a duly approved order affecting crores of people can be issued by an "oversight".
- Congress leader Priyanka Gandhi Vadra said, "Really Nirmala Sitharaman 'oversight' in issuing the order to decrease interest rates on GOI schemes or election driven 'hindsight' in withdrawing it?"
- Her brother and fellow party leader Rahul Gandhi alleged that the small saving rates would be reduced soon after elections. "This government is of jumlas (rhetoric) and the loot of common people," Gandhi said in a tweet in Hindi using the hashtag "oversight".
- Party general secretary and chief spokesperson Randeep Surjewala hit out at Sitharaman and said she has no right to continue as the finance minister. "Madam FM, Are u running a 'Circus' or a 'Government'," Surjewala asked.
- Small savings are the lifeblood of India's low- and middle-income groups, and cutting interest rates would have dealt a severe blow to hundreds of millions of Indians at a time when many have lost jobs and faced pay cuts amid the coronavirus disease (Covid-19) pandemic.
- After the withdrawal of the scheme, PPF and NSC will carry an annual interest rate of 7.1 per cent and 6.8 per cent, respectively. One-year term deposit scheme will earn a higher interest rate of 5.5 per cent during the first quarter of the current fiscal while the girl child savings scheme Sukanya Samriddhi Yojana account will earn 7.6 per cent as against reduced rate of 6.9 per cent.
- Prime Minister Narendra Modi's government has attempted to link state-backed small savings rates with yields on government bonds every three months. However, interest rates have largely been kept above market rates, which experts say is due to fear of a backlash from middle class voters.