Today's Paper

No cut in farm subsidies

NEW DELHI DEC. 4. Within a day of the presentation of the mid-year economic review, the Union Finance Ministry clarified that there was no proposal at present to cut farm subsidies or bring about changes in interest rates on small savings.

"There is no proposal to do away with farm subsidy... At the moment, we are not disturbing the interest rates,'' the Finance Secretary, S. Narayan, told presspersons here today.

The mid-year review of the economy, which outlines the broad Government thinking, had said that pension and other retirement benefits needed to be rationalised and that there was a need to revise the rate of interest on small savings in line with movements in market-related interest rates.

On expenditure management, the review said "Any successful expenditure rationalisation and reprioritisation programme must address the issue of subsidies, through rationalisation of the prices of food, fertilizers, LPG and kerosene.''

Giving the official viewpoint, Mr. Narayan said that though the Government favoured movement towards a softer interest rate regime, it was, at the same time, keen to push up savings. Consequently, it had recently launched tax-free bonds for pensioners and retiring employees which effectively offered around 9.8 per cent interest rate, which was higher than the prevailing rates on other savings instruments.

The Finance Secretary said the Government was also concerned about the plight of pensioners dependent on fixed deposits for their income and the Finance Minister, Jaswant Singh, had informed Parliament that he would seek to address the problem of the decline in interest rates in savings instruments in the next budget. Mr. Narayan, however, declined to give details in this regard.

As far as the mounting fiscal deficit was concerned, he said the Government was committed to fiscal consolidation as fiscal deficit was the biggest challenge facing the economy.

To deal with the unsustainable fiscal deficit, the Government would have to tackle the interest burden, subsidies and expenditure, besides improving the tax to GDP ratio and reining in the States' fiscal deficits as well.

While the Government was keen that overall interest rates followed a particular band, at the same time it was keen on providing avenues for savings which were specific and directed, he said.

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