The government on Thursday rolled back small savings interest rate cuts within hours of a notification, attributing it to a mystifying ‘oversight.’
The steep cuts in % rates on schemes ranging from the National Savings Certificates and Public Provident Fund would have hurt millions of middle class depositors. The cuts would have impacted schemes for the girl child and the elderly.
But coming on the eve of the Nandigram elections, which could be a defining moment for the realignment of political forces, the announcement could have swayed the fickle minded voters who are not too ideologically inclined.
Rates of small savings schemes are linked to government bond yields, explain sources in the ministry. According to them, small savings have become key to financing the government deficit, which has widened because of the coronavirus pandemic, increasing the need for borrowings
“Interest rates of small savings schemes shall continue to be at the rates which existed in the last quarter of 2020-2021, that is, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” Nirmala Sitharaman tweeted. However, social media had a field day on the abrupt U-turn and the indiscreet choice of words in the FM’s tweet, attributing it instead to election-driven ‘hindsight’ – as the politically insensitive announcement had coincided with the Nandigram election in West Bengal.
The Ministry of Finance is not known to take impromptu decisions and notifications go through a maze of clearances before they see the light of the day, point out sources. The government, these sources added, had sought the Election Commission's no-objection for the periodic review of interest rates and had got it before making the announcement in the middle of elections. The government had said a periodic review in every quarter was necessary, said sources in the election body.
Former Finance Minister and Congress Leader P Chidambaram took to Twitter to criticise the rollback and pointed out: “Announcement of interest rates on savings instruments for the next quarter is a regular exercise. There is nothing “inadvertent” about its release on 31st March.”
But being the archetypal politician, he put a spin on the matter and criticised the government for “assault on the middle class” and making “lame excuses” when faced with backlash. “The BJP government had decided to launch another assault on the middle class by slashing the interest rates and profiting itself. When caught, the FM is putting forward the lame excuse of “inadvertent error”. When inflation is at about 6 per cent and expected to rise, the BJP government is offering interest rates below 6 percent hitting the savers and the middle class below the belt.” he added.
By end of the day, the general perception was that the government had shown non-application of mind by inflicting the savings rate cut during times of pandemic and economic hardship. Sample this: The interest rate for the five-year Senior Citizens Savings Scheme, paid quarterly, was to be reduced by 0.9 per cent. Rates on the girl child savings scheme Sukanya Samriddhi Yojana would have dropped to 6.9 per cent from 7.6 per cent. The interest rate on the Kisan Vikas Patra (KVP) would have been reduced by 0.7 per cent.