According to finance ministry sources, the Centre's small savings collections may not reach the July Budget Estimate of Rs 4.2 trillion, which has already been revised downward from the Interim Budget estimate.
"We had reduced it (small savings deposits) from the Interim Budget levels." The current collections will not exceed the lower estimate from the July Budget," according to a finance ministry official.
According to sources, the majority of minor savings deposits would occur in March. The Interim Budget for FY25 predicted net receipts at Rs 4.7 trillion, which were eventually lowered to Rs 4.2 trillion in July 2024.
"The government had stated that it had room to reduce g-sec borrowing. This might potentially help to cover any expected shortage in small savings," said Vivek Kumar, economist at QuantEco Research.
According to analysts, one reason for the expected shortage is a change in taxpayers to the new personal income-tax regime, which has abolished tax breaks on certain investments, diminishing incentives to engage in small savings plans.
To finance its fiscal imbalance, the government combines cash balance withdrawals, minor savings receipts, and bond market borrowings.
With nearly 400 million subscribers, the small savings scheme portfolio consists of 12 instruments, including the National Savings Certificate (NSC), Public Provident Fund (PPF), Sukanya Samriddhi account, and Kisan Vikas Patra, some of which provide tax benefits.
For the third consecutive quarter beginning October 1, the government maintained interest rates on different small savings plans, including PPF and NSC.
The Mahila Samman Savings Certificate, introduced in the FY24 Budget to encourage savings among Indian women, will expire in March 2025. The initiative, which offers a set 7.5% interest rate with a partial withdrawal option, has collected Rs 30,000 crore since its inception.
The 2023-24 Economic Survey expressed concern about the financialisation of the Indian economy. It had stated that, while financial innovations like as derivatives and single-stock futures were useful, they may be premature given India's existing per capita income, potentially altering underlying savings patterns and capital development.
According to the Survey, when the pace of financialisation of the economy or financial innovations in capital markets outpaces economic progress, as seen in the Asian financial crisis, problems arise.
