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Small savings grow 25% in April-July

P Vaidyanathan Iyer in New Delhi

One would assume small savings instruments to lose their sheen after the 200 basis points cut in interest rate in the last two years.

But, in the first four months of the current financial year, gross small savings have grown 25 per cent compared to the same period last year.

According to data compiled by the finance ministry, the gross small savings collections during April-July 2002 stand at Rs 34,400 crore (Rs 344 billion), higher by Rs 6,728 crore (Rs 67.28 billion) against realisation during April-July last year.

The net collections i.e. after redemptions, were in fact, almost 31 per cent or Rs 3,900 crore (Rs 39 billion) higher at Rs 16,700 crore (Rs 167 billion) during the period.

"The growth rate is higher that what it was last year," said a finance ministry official, pointing to buoyancy in the small savings collections during the current financial year.

For the full year 2001-02, while the total gross small savings mop-up was Rs 91,000 crore (Rs 910 billion), the net collections were about Rs 44,200 crore (Rs 442 billion).

Saumitra Chaudhuri, economic advisor & research coordinator, ICRA Ltd, said, investors are left with little choice for parking their funds in avenues which offer safe and steady returns. "The other alternative could mean foregoing security for higher returns," he said.

In 1997, when interest rates on fixed income products like deposits with non-banking financial companies, chit funds and mutual benefit funds and even manufacturing concerns, were as high as 18 per cent, investors flocked to such avenues to make the best of their savings.

But, they comprised with the security aspect. Several NBFCs crumbled leaving investors with limited opportunities now. In a way, it also reflects the insensitivity of the interest rate on savings.

According to the Reserve Bank of India, the household savings in 2001-02 increased to 10.9 per cent of the gross domestic product from 10.8 per cent in the previous financial year.

During the Ninth Plan, the household savings increased to 10.5 per cent of GDP as against 10.2 per cent in the Eighth Plan period (1992-97).

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