Small savings rate may hike if inflation rises

Replying to a query, Lahiri said the small savings rate are linked to the market, so ‘theoretically’ it could be hiked in case of rise in inflation, but said he did not expect such a situation. The recent increase in inflation, Lahiri said, was mainly due to the rise in crude and edible oil prices.

In his speech, FM Jaswant Singh announced that the rates of interest on public provident fund, small savings schemes, etc, would be reduced by 1 per cent, for ‘‘high rates on interest, in a low inflation regime, clearly act as disincentive to investment.’’ Narayan pointed out that the FM did not make any assumptions regarding growth in his speech. An effort has been made to strike a balance between fiscal consolidation and growth, he added.

The Budget is growth-oriented, the finance secretary said, adding that innovative methods of the funding of infrastructure are being made. It will give a strong impetus to sectors such as textile, tourism and gems and jewellery, Narayan said. Budget addresses the concerns of the citizenry, the concerns pertaining to health, pensions and poverty, he said.

In order to achieve fiscal consolidation, there are several means in the Budget for checking expenditure, increasing revenue and containing debt. The rates of relief bonds will be announced on Saturday, said Narayan.

There has been a strong recovery in revenue collection, about 17-18 per cent growth, said Rao. In direct taxes, growth was 20 per cent, though it was short of the target which was 32 per cent. Regarding indirect taxes, there was no shortfall in customs, but excise slipped slightly, he said. Unlike in the last few years, for the next fiscal the Budget has fixed modest targets, which the government not only expects to attain but to exceed, Rao said.

Regarding the expected increase in crude prices any consequent reduction in excise, he said there is sufficient excise cushion to absorb big impact of high crude prices.

The customs duty measures proposed in the Budget would result in a revenue loss of Rs 2,100 crore, mainly on account of reduction in peak customs duty from 30 to 25 per cent and gold from Rs 250 to Rs 100 per 10 grams, he said. The loss in revenue on account of excise duty reduction would be around Rs 3,000 crore, he said.