Letter to BS: Lowering of interest rates for small savings not a wise move

This refers to “Household savings drop to 6.5% of GDP in FY 19” (February 4). At a time when the rate of household savings has fallen to the lowest in eight years, the government has introduced the option of exemption-free tax structure. It is looking at lowering the interest rates of small savings and reducing tax incentives for them. This is not a wise move at a time when the rate of household savings is falling. India has practically no social security system for the old and the unemployed. It has no real efficient and affordable public health system. Small savings help in the education and marriage of children, besides providing support during old age and sickness. 

By weakening the foundation of small savings in a country where people are afraid to keep their money in banks, where interest rates are falling steadily, where the bond market is not developed and equity markets not understood by many, the government is doing a disservice to the people. Income Tax laws and regulations form a part of fiscal and economic systems and should not work at cross purposes with them. Better sense must prevail.

Arun Pasricha, New Delhi

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