Interest hiked on small savings to beat EC date

Mar 05 2014, 01:11 IST
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Fate of Rs 1.5 lakh crore JNNURM Phase-II, FDI in railways on Cabinet agenda uncertain. Reuters Fate of Rs 1.5 lakh crore JNNURM Phase-II, FDI in railways on Cabinet agenda uncertain. Reuters
SummaryFate of Rs 1.5 lakh crore JNNURM Phase-II, FDI in railways on Cabinet agenda uncertain.

The UPA-II has been on an overdrive to dole out sops to lure voters in its last days, with the Election Commission expected to sound the poll bugle on Wednesday, which would reduce it to a lame duck. Last week and the previous one saw the Cabinet and its designated panels clearing proposals that would lead to a combined annual outgo of R23,000 crore. (see chart).

On Tuesday, the government raised interest rates by 10-20 basis points for small savings schemes up to a maturity of 5 years, but left the public provident fund rate unchanged at 8.7%.

Although the rate hikes are as per an earlier policy decision to align small savings rates with the yield on government securities, the timing indicated an intention to beat the EC deadline. Once the election schedule is announced, the model code of conduct comes into force, preventing policy announcements which could influence the electorate.

However, the government may have to reduce its ambition to take a few more policy decisions it had contemplated, as the EC is expected to announce the election schedule on Wednesday morning. Among these policy initiatives Ė whose fate is now uncertain Ė is the second phase of Jawaharlal Nehru National Urban Renewable Mission (JNNURM). JNNURM Phase I was part of the consumption-linked fiscal stimulus announced by UPA-II subsequent to the 2008-09 global global crisis.

As per the urban development ministryís plan outlined in a note that was meant to be considered by the Cabinet on Thursday, JNNURM Phase II would have an outlay of Rs 1.5 lakh crore to be spent over a period of 10 years, almost the double the Phase I outlay.

Phase-II of the mission wonít be state-specific like its previous version where every state was given projects. This time, the states would be given grants on first-come, first-served basis. The government has also included the development of waterways, including grants for procuring boats, setting up of rope-ways in hilly towns and procuring buses for cities every year.

The government had extended the tenure of the mission for two years from April 2012 to March 31, 2014 as several projects were yet to be completed. The mission, at present, is being implemented in around 70 major cities. Phase 2 is expected to cover more towns.

Other important issues slated to be taken up by the Cabinet on Thursday are 100% foreign direct Iinvestment (FDI) in railways

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