Small Savings Crucial for Govt’s Borrowing Discipline
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.