Growth robust amid global market turmoil: Shaktikanta Das

Shaktikanta Das described growth by Asia's third-largest economy as "robust" and said it was driven by manufacturing.

Updated - February 11, 2016 05:30 pm IST

Published - February 11, 2016 12:15 pm IST - NEW DELHI

In an indication that interest rates for small savings schemes are set to be lowered, the Government said on Thursday that it plans to align them more closely with market rates. The rates for the long term schemes and those for the girl child and senior citizens will remain unaffected by the decision, Economic Affairs Secretary Shaktikanta Das.

The new rates would be applicable from April 1, 2016, he said, refusing to divulge the quantum of the revision.

“Whatever policy rates are being announced by the Reserve Bank, the small savings rate will also pass it on….the effort has been such that the reduction in rates is passed on and given effect to the system,” Mr. Das briefed reporters.

The Reserve Bank has over the last one year reduced interest rates in several cuts by over a percentage point.

At present, the small savings rates are linked to Government Securities and are readjusted every year. The decision, Mr. Das said, is to start adjusting the rates on quarterly basis. “The executive order and notification would be issued in a day or two… Broadly the underlying philosophy of the planned changes is to align the small savings rates more frequently and more closely to the market aligned,” he said.

The smalls saving schemes include Post Office Monthly Income Scheme (MIS), PPF, Post Office fixed Deposit Scheme, Senior Citizens Savings Scheme, Post Office Savings Account and Sukanya Samriddhi Accounts.

While the rates for the girl child and senior citizen schemes will also be adjusted every quarter, the spreads they have over the G-Sec rates will be left unaltered, Mr. Das said. “Taking into consideration the interest of small savers and some important social sector measures of the government, the rates under the girl child scheme, the senior citizen scheme...they will continue as it is,” he said.

He also said that all savings of over 5 years duration will continue to have the spread. “Government has taken into consideration the interest of small savers and the need to also encourage long term savers,” said Mr. Das.

Asked if the banks were likely to pass on the benefit of the rate cuts to borrowers, he said that banks have passed on only 70 basis points of the cuts adding up to more than 125 basis points the Reserve Bank has announced since January last year. “Banks are free …It is for banks to decide by what basis points they will cut interest,” he said.

The Economic Affairs Secretary also said that the decline in the stock market indices in India as well as in the exchange rate of the rupee is not as severed as in some other countries. “Over the last few days the NSE and BSE have experienced a lot of volatility…uncertainty and volatility is the norm world over now...India is not an exception, but is better off than many other markets.”

Seeking to calm investors, he said that since January, Nifty and BSE have dropped by about 10 percent, which is less than the declines in other countries. He gave the figures for the drops in the stock market indices for the same period for other countries: Japan, he said, has lost 21%, S&P 500 of the US 10.35 %, Hong Kong 14 %, Singapore 12 %, UK 10 % and Shanghai 28 %.

He also said that that given the global weakness, the advance estimate for the current financial year 7.6 per cent released earlier this week by the Central Statistics Office (CSO) was not bad although the agriculture sector would continue to remain a challenge.

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