Union Finance Minister P Chidambaram on Thursday said that increasing savings and their optimal allocation for productive uses lead to higher economic growth.
In his Budget speech in Lok Sabha, Chidambaram said: "After touching a high of 36.8 percent in 2007-08, gross domestic saving fell by 6 percentage points in 2011-12. The private sector, comprising households and corporate, remains the contributor to saving. The household sector must be incentivized to save in financial instruments rather than buy gold."
Hence, the minister said, the following measures have been proposed:
Firstly, the Rajiv Gandhi Equity Savings Scheme will be liberalized to enable the first time investor to invest in mutual funds as well as listed shares and one can do so, not in one year alone, but in three successive years. The income limit will be raised from Rs. 10,00,000 to Rs. 12,00,000;
Secondly, a person taking a loan for his first home from a bank or a housing finance corporation upto Rs. 25,00,000 during the period 1.4.2013 to 31.3.2014 will be be entitled to an additional deduction of interest of upto Rs. 100,000. This will promote home ownership and give a fillip to a number of industries like steel, cement, brick, wood, glass etc. besides jobs to thousands of construction workers.
Thirdly, in consultation with RBI, it is proposed to introduce instruments that will protect savings from inflation, especially the savings of the poor and middle classes. These could be Inflation Indexed Bonds or Inflation Indexed National Security Certificates. The structure and tenor of the instruments will be announced in due course.