Small Sav­ings Cru­cial for Govt’s Bor­row­ing Dis­ci­pline

The Economic Times - - Finance & Commodities - Joel.Re­bello@ times­ Mar­ket Bor­row­ing Af­ter Adding Re­demp­tions

Mum­bai: The gov­ern­ment is at the risk of over­shoot­ing its mar­ket bor­row­ing for the next fis­cal year if it does not garner the ex­pected money through small sav­ings schemes at a time when in­ter­est rates in these schemes are headed lower. The gov­ern­ment, which has seen small sav­ings in­flow of ₹ 1 lakh crore so far in the cur­rent fis­cal, has bud­geted an iden­ti­cal amount for the next fis­cal as well. How­ever, some econ­o­mists say this tar­get is am­bi­tious.

In his bud­get speech, FMArun Jait­ley said the gov­ern­ment will bor­rowanet ₹ 3.48lakhcrore­from the mar­ket in fis­cal 2018 al­most sim­i­lar to the ₹ 3.47 lakh crore in the fis­cal end­ing March 2018. In­clud­ing re­demp­tions, the bor- Soumya Kanti Ghosh, chief eco­nomic ad­viser, SBI. Ghosh said that in the past five years an av­er­age of ₹ 40,000 crore was col­lected each year through these schemes mainly be­cause of the ₹ 1 lakh crore that has flowed in this year.

“Be­fore this year, av­er­age de­posits in these schemes was ₹ 25,000 crore. It is un­likely we will see big num­bers in two con­sec­u­tive years,”Ghosh­said.Small­sav­ings schemes like Pub­lic Prov­i­dent Fund (PPF), Kisan Vikas Pa­tra (KVP) and Na­tional Sav­ings Cer­tifi­cate (NSC) have at­tracted in­flow be­cause the dif­fer­ence in in­ter­est rates be­tween these schemes and bank de­posits have widened as bank rates have fallen over the past one year. This dif­fer­ence may stay al­though it is likely to come down.

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