Sinha not for further cut in interest rates on savings

By Our Special Correspondent

NEW DELHI, OCT. 5. The Union Finance Minister, Mr. Yashwant Sinha, today gave an assurance that there would be no further cut in the interest rates on small savings this year despite a general move towards softer interest rates.

Speaking to presspersons here, Mr. Sinha said the recent cuts in lending rates by the U.S. did not automatically mean that there would be rate cuts in India too. It was for the Reserve Bank of India to decide when and how much should interest rates be revised. The Finance Ministry could only create conditions for a ``softer interest rate regime''. In this context, he referred to the reduction by 1.5 per cent in interest rates on contractual borrowings earlier this year.

Another condition for a softer interest regime was controlled fiscal deficit. ``Though this is an extremely difficult year, we still hope to be as close as possible to the budgeted fiscal deficit,'' he added. The revenue situation had also improved after September and the shortfall in collections that was being anticipated earlier would not happen. The Ministry had tightened collection procedures and the performance of senior officers was being closely monitored to see that there was proper tax compliance. ``This does not mean that individual taxpayers would face any undue harassment and any officer indulging in such practices would be dealt with severely,'' Mr. Sinha said.

Collections from service tax, which had been extended to a number of new items since July this year, were also expected to be more than the budgeted target, he added.

Referring to the general state of the economy, he admitted that sentiments were depressed and an air of uncertainty was there about the future.

However, the Government had initiated a number of measures to pep up demand, particularly in the rural sector, by making fresh investment and expediting on-going projects.

He said he would finalise a blueprint for greater financial decentralisation in order to ensure that projects took off in time. Mr. Sinha held a review meeting today with banks and financial institutions to ascertain the status of private sector investments and identify bottlenecks that could be holding up the projects.

Asserting that the Government was committed to the issue of universalisation of elementary education, he said it would arrange for necessary funds.

He said the process of forming a cabinet committee on economic strategy was on, which had been decided upon at a meeting convened by the Prime Minister on September 4.

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