The savings habit of the household sector in the country has changed significantly. According to finance ministry figures, small savings in the first seven months of the current fiscal grew by a mere 0.71 per cent compared with 17.73 per cent in the same period last year.
While the Centre is likely to save a substantial amount as interest outgo for servicing the loans, the figures indicate a phenomenal change in the savings behaviour. In abosolute terms, small savings grew by Rs 337 crore during April-October 2001 against Rs 7,149 crore in the corresponding period last year. In 1999-2000, the small savings collections grew by Rs 5,528 crore, reflecting a growth rate of 15.89 per cent.
Finance ministry officials acknowledged that the drop is substantial. However, they were not sure whether the stated resolve of the government to phase out tax concessions on these instruments was the main reason for the drop.
More From This Section
While the dip in the small savings growth was expected to be low this year due to the economic downtrend, the current drop is surprising as the household sector puts the bulk of its savings in the small savings instruments (35 per cent of its total savings). At Rs 88,468.41 crore in 2000-01, this was the largest form of savings in the country.
Public finance specialist DK Srivastava of the New Delhi-based National Institute of Public Finance and Policy said the slowing down of the growt in small savings means that the people have begun to factor in the fall in nominal interest rates. The government has lowered the administered interest rates on these savings by 1 to 1.5 per cent earlier this year.
Srivastava said since small savings is the largest contributor to the savings rate, the economy may end with a savings rate of around 21 per cent compared to about 23 per cent recorded till last fiscal.
Despite the sharp drop in growth rate, the government still expects the total gross collection under this head this fiscal to grow nearly 6 per cent to Rs 93,750 crore. But going by the current trends, it appears tough.
Over the past couple of years, the government has emphasised that the mounting interest liability on small savings was a drain on its resources. These instruments include post office deposit schemes, Kisan and Indira Vikas Patras, National Small Savings Certificates and Public Provident Funds.
The YV Reddy committee on small savings set up to review small savings this year has said