Monday, March 18, 2013

Postal savings shrink on inflation, lower interest rates

KOLKATA/SILIGURI: The government faces the challenge of holding investment rate from slipping further as small savings continued to erode amid lower rates and persistent high inflation, which prompted households to invest in gold.

The latest data published by the Reserve Bank of India showed that outstanding small savings maintained with post offices have shrunk to 601,961 crore in December 2012, 1.5% lower than the year-ago position. Monthly savings, which has always been the top draw among all postal savings schemes, have shrunk 4% to 201,969 crore.

"People always look for alternate avenues of investment that offers higher rate of return. The promise of apparent higher return offered by non-banking financial institutes is a major attraction," said John Samuel, chief post master general in Jammu & Kashmir.

India's central statistical office said the investment rate is estimated at 35% in 2011-12 against 36.8% in 2010-11. Both public and private investment declined as a share of GDP. Savings rate is estimated at 30.8% in 2011-12 against 34% the year before as a percentage of GDP.

The moderation in the net financial household savings rate reflects a drop in small savings and slower growth in households' holdings of bank deposits, currency and life funds.
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