In­dia has to move to lower in­ter­est rates: FM on PPF rate cut

The Pak Banker - - 6BUSINESS -

Un­der flak over slash­ing in­ter­est rates on small sav­ing schemes, Fi­nance Min­is­ter Arun Jait­ley on Sun­day de­fended the move, say­ing the coun­try has to move to­wards lower in­ter­est rates to make the econ­omy more ef­fi­cient rather than slug­gish.

He also hoped for the pas­sage of bank­ruptcy and GST bills in the se­cond half of the Bud­get Ses­sion, say­ing dif­fer­ences on the GST bill seem to be "nar­row­ing down" and he, along with Par­lia­men­tary Affairs Min­is­ter Venka­iah Naidu, will make "more ef­forts" to bring the Congress on board.

Speak­ing to re­porters at the BJP na­tional ex­ec­u­tive meet here, he said in­ter­est rates on small sav­ing schemes were "for­mula based" and the govern­ment uses its re­sources to give sub­sidy on th­ese schemes, above the rates de­ter­mined by the mar­ket.

Re­ject­ing the crit­i­cism of Congress Vice Pres­i­dent Rahul Gandhi for re­duc­ing in­ter­est rates on PPF and se­nior ci­ti­zen sav­ing schemes among oth­ers, Jait­ley said the UPA govern­ment also went by the same for­mula but the rates were high dur­ing its time due to a slug­gish econ­omy.

"The for­mula has been there for long, we did not make it. The mar­ket de­ter­mines the in­ter­est rate and govern­ment gives sub­sidy on its se­cu­ri­ties, in­clud­ing sav­ing schemes, above it.

We give it in PPF, we give a lit­tle more on se­nior ci­ti­zen schemes. It's for­mula driven, it's linked to the mar­ket. "In­ter­est rates had risen a lot ear­lier but now they have come down. The way econ­omy is mov­ing to­day, we can­not have a sit­u­a­tion where lend­ing rates are go­ing down but de­posit rates re­main high. Both are linked. To make econ­omy more ef­fi­cient rather than slug­gish, the coun­try has to move to­wards lower in­ter­est rates in both," the Fi­nance Min­is­ter said.

The PPF in­ter­est rate at 8.1 per cent re­mains "rea­son­ably lu­cra­tive", he said, adding nowhere in the world, in­ter­est rate is so high. As it is tax free, the ac­tual earn­ing is close to 11-12 per cent, Jait­ley said.

He also de­fended the pro­posal of one per cent ex­cise duty on gold jew­ellery, he said lux­ury items must come un­der tax­a­tion sys­tem as the coun­try is mov­ing to­wards GST sys­tem.

Jewellers were con­cerned about ha­rass­ment from tax of­fi­cials and "I fully agree that it should not hap­pen," he said. Jewellers had on Satur­day called off their 18-day old strike to de­mand roll­back of pro­posed ex­cise duty on non-sil­ver jew­ellery.

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