Finance minister Arun Jaitley on Tuesday said that it is necessary to encourage domestic savings as it would convert into capital for development.
Pointing out that the country’s savings rate touched a record high of 36.8 per cent in 2007-08 when the economy was doing well, Jaitley said, “Over the last two three years, when economic growth slowed, our savings rate declined to less than 30 per cent. So it is very necessary to encourage people to increase domestic savings.”
The finance minister, who was speaking at the launch of the revamped Kisan Vikas Patra, said, “We are not only saving and earning interest but the saving turns into capital for development.”
He noted that KVP, which is not only limited to farmers, would serve two purposes.
“The basic aim is to provide an investment opportunity ti people who do not know where to invest and put their money into options like ponzi schemes,” he said, stressing that the KVP is a government run scheme, which is simple and easy to access. The second aim is to increase savings in the country…such savings instrument not only earn interest but help in development of the country,” he stressed.
Jaitley said the KVP would be a bearer instrument without name of the holder in the first phase. “So people with currency can invest in this,” he said.
Finance ministry officials said that the interest rate on the KVP would be fixed at about 8.5 per cent, unlike other small saving schemes whose interest rates are revised every year from April 1. Finance secretary Rajiv Mehrishi said that the KVP would provide an alternative to investments in gold and silver.