The Narendra Modi government’s flip-flop over small savings schemes shows its casual approach towards important economic issues. Also, it exhibits the ruling dispensation’s disregard for the interests of its core constituency—the middle class.
It is mostly middle class people who have invested in such schemes. The return on Public Provident Fund or PPF was slashed to 6.4 per cent from 7.1 per cent, on National Savings Certificate to 5.9 per cent from 6.8 per cent, and on the girl child savings scheme Sukanya Samriddhi Yojana to 6.9 per cent from 7.6 per cent. Similarly, rates on time bank fixed deposits were brought down from 5.5 per cent to 4.4 per cent. Ditto for Senior Citizen Savings Schemes, from 7.4 per cent to 6.5 per cent, and Kisan Vikas Patra from 6.9 per cent to 6.2 per cent.
Within 24 hours, however, the government rolled back its decision on the revised rates. “Interest rates of small savings schemes of the government of India 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 Orders issued by oversight shall be withdrawn,” Finance Minister Nirmala Sitharaman tweeted today morning.
One need not be a political commentator to guess the cause of the rollback: this seems to have happened because of the ongoing elections in four states and the Union Territory of Puducherry. A ruling party that loudly claims to be the champion of ordinary people cannot afford to anger Middle India at a time when Assembly polls are being contested fiercely, especially in West Bengal and Assam.
Few will be surprised if the rate cut orders are brought back after the state elections. For the government is fiscally stressed. Even before the coronavirus, the economy was slowing down; the ill-advised, nationwide lockdown brought it to a halt.
Worse, the Modi regime has not lived up to the promise of ‘maximum governance, minimum government.’ Dirigisme continues to hold sway; instead of ushering in radical decontrol, the government empowered its agencies which were never known for being business-friendly. Unsurprisingly, not many investors have put in their money in the country.
There is little economic thinking in the government. It looks like taxmen are calling the shots. Hence the proposal to cut interest rates of small savings schemes—the proposal that is likely to be revived.