Monday, March 11, 2002, Chandigarh, India

National Capital Region--Delhi



Tight squeeze: incentives to save on the decline

The government has once again made the salaried class the scapegoat (Tight squeeze, March 1). At one end, the prices of essential items like LPG, rationed sugar, kerosene have been hiked. At the other, the government has reduced the 20% tax rebate on savings to 10% for those earning between Rs 1.5 lakh and Rs 5 lakh. It has also levied a surcharge of 5% on incomes above Rs 60,000 in the name of national security. The most hurt are the savers, pensioners and other fixed income earners who can expect their returns on PPF and post office schemes to fall, starting by about 50 basis point.

The saving habit is eroding fast in India and the government has done little to arrest this trend. The consumption boom has further fuelled the decline in household savings, which constitute 80% of gross domestic savings. The government must realise that a saving-cum-growth-strategy can contribute effectively to development.

In India, the income on saving instruments —banks and post office deposits— constitutes the mainstay for the middle income group, particularly retired employees and housewives. The government, impressed by the trends in the West, has started viewing this income as unearned one, which is taxed heavily there. How can we compare this with the West, where a wide range of pension plans are available, which do not exist in India so far?

The decision of the government is based on the recommendations of the committee constituted under the chairmanship of Dr Y.V. Reddy, Deputy Governor of the RBI. But the recommendations of the Reddy committee are not only half-baked but also based on wrong perceptions and ill-informed data.


The committee termed small saving instruments as a “basket of diversified and heterogeneous products” and has observed that the “various incentives have not only discriminated between the tax paying and now-tax paying savers, but also created distortions in the yield structure of small savings instruments vis-a-vis other debt instruments”. The panel has laid three broad categories: postal deposits, savings certificates and social security schemes like PPF and retirement schemes. Out of these, the NSC VII issue is more of a tax saving than a medium term saving instrument. The Kisan Vikas Patra is the only pure saving option.

The panel has also recommended that in case of PPF, a floating rate of interest be bench-marked annually on the average yield of five years restricted maturity on government paper. But no exercise seems to have been undertaken on making such interest rates inflation-indexed as in the UK, where the saving certificates provides tax-free returns equal to changes in the retail indexed price. But the government is kind to spare this instrument from withdrawals of the existing tax incentives.

India has one-eighth of the total population of those aged 60 years and above. The panel would affect adversely a sizable population in India. There is no doubt that the deposits of small savings which registered a rise in resource mobilisation from Rs 785 crore in 1970-71 to Rs 545, 831 crore in 1998-99 will show a downward trend.


Warth of the lambs: Apropos the leader Tight squeeze (March 1), the Finance Minister has failed to learn any lesson from the results of the recent elections. Economic reforms should not be at the cost of the masses. Those in power must remember that justice should be tempered with mercy. Those who govern must see how the people react to the administration. Ultimately people are the final arbiters. Warth of the salaried-class (lambs) will definitely teach the “powers” such a lesson that the next Union Budget might be presented by a Chidambram unless the tax rebates on savings are made more attractive and standard deductions on salary incomes are increased for all income groups.



Justice Gurnam Singh

The Punjab Arts Council has taken a commendable decision to install the portraits of 100 eminent Punjabis who contributed to the building of modern Punjab. Justice Gurnam Singh deserves to be included in this list as he was the first Chief Minister to start, as an experiment, the state purchases of foodgrains so that poor farmers could be freed from the clutches of traders. Mr Satya Paul Dang was his Food Minister and he helped Justice Gurnam Singh in making this experiment a success. When the Government of India learnt about this noble cause, it set up the Food Corporation of India in 1968 due to the persistent efforts of Justice Gurnam Singh, who had a great say with the powers-that-be in Delhi.

Modern Punjab, whose economy improved tremendously due to the establishment of the Food Corporation of India, owes a great debt to Justice Gurnam Singh, who also made the Green Revolution a success. Not only Punjab prospered, but also the country became self-sufficient in foodgrains.

So Justice Gurnam Singh’s portrait deserves a place in the Art Gallery in Chandigarh.

GURDEEP KAUR TOOR, Khamano (Fatehgarh Sahib)


Burden on courts

I have a suggestion to reduce burden on courts due to unnecessary litigation and harassment caused by greedy people to grab others’ property by preparing forged agreements and showing cash transactions in back dates. They also obtain stay orders for the sale against the owner on the basis of these documents. It should be made mandatory that some amount (may be Rs 100), if not all, be paid by a bank draft, otherwise the agreement be treated as null and void and the courts should not give weightage to such agreements of sale.

This should come into force immediately and no agreement be considered valid even if it is an old one. By doing so considered valid even it is old one. By doing so many victims will be saved and the burden on courts will also reduce considerably.


Define a female?

When she is 20, she is like Africa, half-explored. At 30, she is like India, warm, luxuriant, mysterious. At 40, she is like Europe, all of a ruin. At 60, she is like Siberia, everybody knows where it is, but nobody wants to go there.

K.J.S. AHLUWALIA, Amritsar


Q: Guess what N.D. Tiwari will be referred to as Chief Minister, Uttaranchal?

A: “New Delhi Tiwari!”

K.J.S. AHLUWALIA, Amritsar

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