Flip-flop on rate cut

Small savings schemes are a lifeline for the middle class, particularly the elderly, who bank on the interest accrued over years or decades to meet their financial needs. Though the interest rates are quite low, the much-harried common man feels reassured that he has something to fall back on. The uncertainty and chaos triggered by the Covid-19 pandemic have made people even more dependent on such ‘safe’ options. Going against the grain, the government produced a shocker on the last day of the 2020-21 fiscal when it announced a steep cut in interest rates on small savings schemes, including the Public Provident Fund (PPF) and the National Savings Certificate (NSC). The new rate on PPF was reported to be the lowest since 1974. This people-unfriendly decision, nothing less than a recipe for disaster in the election season, promptly drew flak from all quarters. Less than a day later, the government withdrew the order, with Finance Minister Nirmala Sitharaman dismissing it as a mere ‘oversight’.

The Centre’s lightning-quick response to the backlash left no room for doubt that the ruling party didn’t want to antagonise voters of the poll-bound states. However, the government owes an explanation as to why it took the mindless, inconsiderate step in the first place. It is a matter of common sense that the interest rates should have been left unchanged, considering that the country is in the throes of the second wave of the pandemic and needless disruptions are best avoided.

In the past year, the Centre has unveiled a series of relief packages to bring the lockdown-battered economy back on track, reaching out to the poorest of the poor on the one hand and the big businesses on the other. Such measures have helped to turn the tide after a crippling recession. But the middle class, taken for granted as always, has been left to fend for itself. The least that the government can do is to pay attention to this section of society that is contributing significantly to the economic recovery — against all odds.