| Time to ponder
New Delhi, Feb. 7: Prime Minister Atal Bihari Vajpayee has directed finance minister Jaswant Singh to work on “lifetime concerns” such as pension plans for the lower middle class, workers’ security net and a relief package for senior citizens into his plans for this year’s budget.
Vajpayee wants Singh to hurry up with a workable pension-cum-disability cover which will encompass most white-collar workers and at least the bulk of blue collar India that could be offered as part of the “budget vision”.
He has also insisted that work should be started on a workers’ security net which will help retrain retrenched workers and even loan them small amounts to start life afresh. The Prime Minister is apparently concerned that industrial restructuring has proved costly in terms of jobs lost and this could afford the Opposition an easy poll issue in industrial districts.
Similarly, Vajpayee has directed clearly that an interest income protection scheme has to be worked out for senior citizens which would allow them to maintain their current standard of living, inspite of falling interest rates and rising inflation. This is likely to be done through an inflation-linked interest income scheme to be unveiled with the budget.
He has also made it clear that political wisdom lies in not retracting on tax sops for the aged and women. The Prime Minister has had some six to seven hours of discussions with Singh spread over the last two weeks on these and other issues related to the budget.
The move to bring in ‘lifetime concerns’ has come after an analysis by the Prime Minister’s aides showed that the states going in for polls in the near future have a greying population.
The bulk of the Indian population today is in the middle or old age group and the state which has the youngest average voter age — Gujarat — went to the polls late last year.
These ‘lifetime concerns’ are expected to appeal to the middle-aged and senior citizens and could help the BJP shore up its largely urban, middle and lower-middle class vote base.
Top finance ministry officials said transforming the PM’s directives into policy was a “tough job but we are trying hard.”
Officials said state-run banks had for some time been working on the possibility of deposit schemes which linked bank interest rates with the rate of inflation so as to keep real interest rates stable.
This implies that on such inflation-linked deposits, the rate of interest would move up or down depending on the inflation rate.
Real interest rates which are calculated by deducting inflation rates from interest rates are supposed to be the benchmark to incentivise depositors to save. By allowing banks to float their interest rates against the rate of inflation and permitting them to change the rate every month, savings could be safeguarded.
This is being considered so as to make it more attractive for pensioners and small investors to save in time deposits with banks. Inflation rates have been reigning low over the last fiscal barring minor upswings once in a while.
Similarly, on pensions, the government has been considering three alternate models: the first is a mandatory system that will pay out a minimum subsistence pension to all for which the state makes a substantial contribution. The second, also a mandatory one for the formal sector, works on the pay as you go principle; the third model, which has been accepted as a non-mandatory pension scheme, will cover both formal and informal sectors and will be privately managed with cross subsidisation.