Dr. N S Bhat, Mangalore

Raise Rates of Interest on Post Office Term Deposits.
Post Office Term Deposit rates of interest on NSC and similar term deposit schemes need to be raised to a minimum of 10 per cent per annum. This is necessary in order to ensure a positive real yield to the savers on their savings and investments during a period of inflation and rising prices. Unlike the industrialists and businessmen, who do real investments, the only avenue of investment available to the individuals and households, who contribute the lion’s share of domestic savings in the country, is financial investment in the form of Post Office deposits, bank deposits, stocks of industrial companies and similar financial instruments. Purchasing shares and stocks of industrial houses only means financial investment to the individuals.
Unless this section is guaranteed a just return on their investments, which should reasonably be equal to the rate of growth of the economy, this section will be discouraged from saving, on the one hand, thereby reducing the availability of domestic resources for investment, and , on the other, the gradual erosion of the real income of the household sector due to low yield on savings and inflation will result in the insufficient expansion of the domestic market resulting in a slow down of the rate of growth of productive activity in the economy. The best and the sorest way of encouraging domestic productive activity is by encouraging t6he growth of the domestic market by ensuring a reasonable yield to the households and individuals on their savings and investment. This requires a rise in the rates of interest on financial instruments of saving like the NSC and other term deposit schemes of the Government operated through the Postal Department. Raising this rate of interest will also send a positive signal to the banking system of the country to affect a significant rise in the deposit rates of interest very much needed during a period of inflation of hyper proportions as it now prevails in the country.
Brief Profile of the Author:
Dr. N S Bhat
Professor and Chairman Retired
Dept. of Economics
Mangalore University
Mangalagangotri – 574 199
Mangalore, Karnataka