Rate cut on small savings: Elections, WEF report linked to fastest recall

There was already an in-principle approval that the interest rates on small savings instruments have to be aligned every quarter with the government debt papers. So, on Wednesday when the file for adjusting the rates was moved in the budget division of the finance ministry, the routine order did not need to reach Finance Minister Nirmala Sitharaman. 

However, within minutes of the finance ministry order, Bharatiya Janata Party workers in the poll-bound states had begun to reach out to the leaders for rescinding the order, sources said. West Bengal leads the annual state wise table of contribution to small savings at 15.09 per cent. For the year FY18, Tamil Nadu is fifth in the small savings pecking order at 4.8 per cent. The implications for vote swings in West Bengal and Tamil Nadu were only too evident.

A Delhi-based BJP senior leader and spokesperson of the party said it was an order which could wait.

Responding to the concerns within the party, Sitharaman did not have to wait too long to decide. There were also not too many people to consult for her. There is no finance secretary as yet in the ministry, after Ajay Bhushan Pandey retired as revenue secretary on February 28. Tarun Bajaj, secretary department of economic affairs, is holding additional charge as revenue secretary. The budget division, which decides on small savings rates, comes under Bajaj.

She reached out to her advisers, who suggested the circular should not be implemented now, according to a person in the know. The minister could not have withdrawn the order overnight since the offices had closed. She took the next best step — a tweet announcing the withdrawal the following morning.

While state elections seemed to dominate the narrative, another source linked the rollback to an adverse report for India on gender issues by the World Economic Forum (WEF) and Sukanya Samridhi Account Scheme.

Explaining the circumstances, the source said there was sensitive news in the media regarding the WEF's 'Global Gender Gap' report even as  the revision in small savings rates were finalised by the competent authorities.

With the news report occupying significant media space, there was a message from the finance minister's office to provide more data on women depositors and a report on Sukanya Samridhi Account Scheme in the overall volume of savers, a person aware of the developments said.

However, the message from the FM office to hold the file pending such data could not be percolated down properly and the office memorandum to cut the rates was issued around 8 pm on Wednesday in the rush of things as it was the last day of FY2020-21, one of the sources pointed out.

Subsequently, she tweeted on Thursday morning about retaining the rates.

India has slipped 28 places to rank 140th among 156 countries in the World Economic Forum's Global Gender Gap Report 2021, becoming the third-worst performer in South Asia.