Nov 19 2014 : The Economic Times (Delhi)
Kisan Vikas Patra With KYC Welcome
The point is to use the data that is captured
A new avatar of the Kisan Vikas Patra (KVP) launched by the government to encourage people to save more is welcome. It will reduce some demand for gold as investment, curtail imports and help savings, investment and growth. Household financial savings rate dropped to 7.2% of GDP in 2013-14. It should be raised. The answer lies in both reining inflation, improving the appeal of financial savings and offering a wider variety of financial products. KVP offers an annual return of 8.7%, a tad higher than the 10-year g-secs yield of 8.2%, making it attractive for risk-averse investors. It also offers flexibility.Investors can exit after a lock-in of 2.5 years, and also pledge their certificates as collateral for loans. Clearly , an instrument such as the KVP provides comfort to people with limited access to formal finance and makes available long-term funds for investment. It will also keep many away from fraudulent schemes.The redesigned scheme has welcome safeguards to prevent misuse. Banks and post offi ces will have to document addresses, even if a person buying a KVP does not have to quote her permanent ac count number. Remember, in the IPO scam, fake addresses had been ram pant, but were not spotted. New, big data analytics should mine through the data on KVP investors, once made available as a database. Managing big data holds the key to tracking the source of funds. The country has the IT prowess, and that should be harnessed to use big data analytics.
Ideally, the government should have capped the cash component, and also fixed a ceiling on the amount to be invested to ensure that KVP is not seen as a disguised amnesty scheme to launder black money . That there are no tax benefits is welcome, given that tax sops are a drag on the exchequer. However, the government should also promote other instruments such as inflation-indexed bonds (IIBs) by making them available on a large scale that is comparable to the value of gold demand. Risk-averse investors should be able to subscribe to IIBs, and that will augur well for the economy .
Ideally, the government should have capped the cash component, and also fixed a ceiling on the amount to be invested to ensure that KVP is not seen as a disguised amnesty scheme to launder black money . That there are no tax benefits is welcome, given that tax sops are a drag on the exchequer. However, the government should also promote other instruments such as inflation-indexed bonds (IIBs) by making them available on a large scale that is comparable to the value of gold demand. Risk-averse investors should be able to subscribe to IIBs, and that will augur well for the economy .
