Callous manner of policy-making

There can be few other examples of the cavalier manner in which policy is formulated and decisions are taken by the government than its flip flop on the interest rates for small savings instruments on consecutive days. On Wednesday, the government announced a sharp reduction of interest rates on all small savings instruments including the Public Provident Fund (PPF), term deposits, and a host of welfare schemes for senior citizens, girl children and farmers. The new rates were to come into effect from Thursday. But early morning on Thursday, the previous day’s decisions were nullified and the old rates reinstated. Wednesday’s decisions were consequential, as the cuts ranged from 0.4 to 1.1 percentage points across different savings instruments and schemes. in the case of the PPF, the interest rates touched the lowest level since 1974.

Finance Minister Nirmala Sitharaman has said that the orders on rate cuts were issued by ‘’oversight’’. There cannot be a more egregious comment on the decision-making system in the government. Whose oversight? Didn’t the minister and the senior officials in the ministry know the implications of the decision which would have affected millions of people? Are other decisions made in a similar fashion? For example, was demonetisation the result of an oversight? The truth is that the oversight was only about the impact of the decision on the assembly elections in various states. When the government realised that the decision would do harm to the ruling party, it withdrew the decision in a hurry. In the first place, the interest rates were reduced to make it easier for the government to borrow big from the market. It has plans to make borrowals of over Rs 12 lakh crore this year, and high small savings interest rates would have made that difficult. But the fear of a likely adverse electoral impact resulted in the rethinking.

The government did not think of the adverse impact of its original decision on the lives of very vulnerable sections like the senior citizens. There are large numbers of senior citizens who are dependent on their small savings. Their position has become more precarious in the last one year of the pandemic and the lockdown, and the government callously thought of cutting their income to boost its own borrowal plans. The concern over the future of the girl child and the welfare of the farmers, frequently expressed by the government, also came into question with the decision. The withdrawal of the decision has exposed it as opportunistic and cynical, and no one would be surprised if the rate cuts return after the declaration of election results. Better considerations and reasons should go into the government’s decisions, when they are made and when they are unmade.