Nation has to move to lower interest rates, says Jaitley on PPF rate cut

New Delhi: Under criticism for slashing interest rates on small saving schemes, Union Finance Minister Arun Jaitley on Sunday defended the decision and said that it was a move to make the economy more efficient rather than sluggish.

On bankruptcy and GST bills, he said, "I hope that the bills will be passed in the second half of the Budget Session. The differences on the GST bill are narrowing down and we along with Parliamentary Affairs Minister Venkaiah Naidu will make "more efforts" to bring the Congress on board for its passage."

Addressing a press conference after the second day of BJP national executive meet on, Jaitley said interest rates on small saving schemes were "formula based" and the government uses its resources to give subsidy on these schemes, above the rates determined by the market.

Rubbishing criticism from the Opposition including Congress Vice President Rahul Gandhi on slashing the interest rate on small savings, Jaitley reminded that the UPA government too went by the same formula but the rates were high during its time due to a sluggish economy.

"This is not something, which implemented for the first time. It was formula has been there for long, we did not make it. The market determines the interest rate and government gives subsidy on its securities, including saving schemes, above it. We give it in PPF, we give a little more on senior citizen schemes," he said.

"It's formula driven, it's linked to the market. Interest rates had risen a lot earlier but now they have come down. The way economy is moving today, we cannot have a situation where lending rates are going down but deposit rates remain high. Both are linked. To make economy more efficient rather than sluggish, the country has to move towards lower interest rates in both," he added.

The PPF interest rate at 8.1 per cent remains "reasonably lucrative", he said, adding nowhere in the world, interest rate is so high. As it is tax free, the actual earning is close to 11-12 per cent, Jaitley said.

He also defended the proposal of one per cent excise duty on gold jewellery, he said luxury items must come under taxation system as the country is moving towards GST system.

On the context of Jeweller's concern about harassment from tax officials, he said, "It should not happen".

(With inputs from agencies)