If the government is really serious about deregulating interest rates on small savings instruments and linking them to market rates, it should realise that it could prove to be a suicidal move, and, at the very least, an anti-people move. It has appointed a panel headed by RBI deputy governor Shyamala Gopinath to review the structure of the National Small Savings Fund and give recommendations on making schemes more flexible and market-linked. It would include instruments like the Public Provident Fund and the Post Office monthly income scheme administered by the Centre. In rural and semi-urban areas, the Kisan Vikas Patra, for instance, is the most popular scheme. Millions of Indians like you and me, and particularly the lower income groups, invest in these schemes as they have assured returns which currently stand at eight per cent for five to seven years maturity. The returns almost double at maturity. They are among the best savings schemes and have the trust and confidence of millions. In fact, in the last two years of the global financial crisis, when the equity markets were volatile, unreliable and a feast for speculators, the small savings instruments were an oasis of calm for millions of Indians.
These instruments, particularly the Public Provident Fund, are their only safety net for the future. It is a sad commentary on the government that after 63 years of Independence it is unable to provide a security net akin to those in the developed world and as several other countries do for their unemployed citizens as well as in the case of retirement benefits. So to say that the West has these instruments at market rates, and therefore India should have it, amounts to a travesty of justice. The government should first put a safety net in place for the millions of self-employed, unemployed and senior citizens before it rushes into such schemes.
The linking of small savings to the so-called market forces emanated from the 13th Finance Commission headed by Mr Vijay Kelkar. In addition to wanting these schemes market-linked, it also sought a review of the existing terms of loans extended by the National Small Savings Fund to the Centre and the states and to recommend changes required in the lending mechanism. The Centre and the states share the amount raised through the savings of millions of Indians. The Centre gives the states their share as a 25-year loan at 9.5 per cent interest, with a moratorium of five years on the principal amount. It is now finding this a burden it cannot bear; hence the commission’s suggestions to bail out the government at the cost of millions of Indians. But that is the Centre’s problem and not an excuse to take it out on the people’s schemes. It amounts to cutting off your head if you have a headache.
It is clear that the government, which wants to cut its fiscal deficit, is looking at various means to do so, and is attacking the people’s programmes as it is easier than cutting down on its extravagant, unproductive expenditure. It is even easier than doing what it should be doing, namely increasing direct taxes. India at the current junction, considering all the stimulus packages and deficits that the developed countries have, is one of the lowest taxed countries. The government has plenty of scope to increase direct tax revenues. Also, if it is able to curb corruption in the various tax-collecting departments, it would be able to collect much more via taxes and boost its revenue. Its borrowings would fall and this would decrease its revenue expenditure to that extent.