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‘Stupid advice,’ says Chidambaram on interest rate cut for small savings – Hindustan Times

The Congress on Wednesday criticised the government for its decision to reduce interest rates on small saving schemes with senior party leader and former finance minister P Chidambaram calling it a wrong step based on “stupid advice”.

The opposition party demanded its immediate rollback.

The government reduced the interest rates on small savings schemes by 70 to 140 basis points for the year 2020 during April-June quarter.

Public provident fund interest rates in the quarter have been brought down by 80 bps to 7.1% and for KVP — Kisan Vikas Patra — have been slashed by 70 bps to 6.9% and after reduction of 0.8%, the girl child-focussed Sukanya Samriddhi scheme now stands at the interest rate of 7.6%.

“I know that sometimes the government acts on stupid advice, but I am amazed how stupid this advice was. While reducing the interest rate on PPF and small savings may be technically correct, it is absolutely the wrong time to do so,” Chidambaram tweeted.

He said though India’s GDP for the last quarter could not be have been more than 4%, it was time to focus on saving people’s lives and not the GDP.

In times of acute distress and uncertainty about income, people depend on the interest income on their savings, added Chidambaram, demanding immediately rollback of the decision and restoring old rates until June 30.

About the GDP, he said after the three quarters’ growth rates of 5.6%, 5.1% and 4.7% respectively, the fourth quarter of 2019-20 ended Tuesday. “Q4 growth could not have been more than 4%. So, annual GDP for 2019-20 must be a disappointing 4.8%.”

However, Chidambaram said this was the time of discussing the growth rate of coronavirus and not GDP. “Once Covid-19 is in control automatically the GDP will increase. In my view, we should not worry about growth now. The focus should be on saving people’s lives whatever it takes,” he said.

The former finance minister also expressed concern over the government not announcing the second financial assistance package during the lockdown imposed amid the Covid-19 pandemic.

“That is why I am appalled that the government has not yet announced FAP II after the miserly and disastrous FAP of March 25,” he tweeted.

His party colleague Jaiveer Shergill termed the government’s decision “irrational, illogical and ill-timed”, saying it has come at a time when the people are already facing hardship due to the lockdown and the economic recession.

“The BJP government’s decision to cut interest rates on small saving schemes is a heartless and shameful act that will hit the common people, especially the farmers, middle class and the poor who are already suffering due to the downturn in the economy,” he told reporters at a press conference held through video conferencing.

He demanded that the government waive interest on EMIs for the three-month period from March to June, saying the moratorium on EMIs is merely hogwash and a postponing exercise.

Shergill also urged the government to come out with a second tranche of economic relief packages to help small and medium enterprises, and the poor and common people from the economic downturn the country is facing.

“The decision to reduce interest rates on small savings is ill-timed, illogical and irrational,” he said, adding that it will snatch the incomes of 90 crore people in the country.

Shergill said the government will earn an additional Rs 26,000 crore through this reduction in interest rates and said it should not act like “Shylock to extract a pound of flesh” from the people.

The government should instead work towards raising incomes of people instead of shrinking it, for helping them survive this economic downturn, he added.