Piloting the economy

IF an economy rises advancing through the steps of a well-laid staircase of a development blueprint, its decline in the process of reversal would also involve the same journey, and this time the direction would be the opposite. The descent along the steps of economic decline may be much faster than the climbing process if adverse factors come into play concurrently with one reinforcing the effects of another. Managers of an economy have to think seriously about this at delicate points like alert combatant pilots in actions. A report in this paper last Monday, which said that government is mulling reduction in interest rate of saving tools has made many people worried whether the pilots of the economy are now risking crash-landing while economy is on a loose gear.
As per the report, reduced interest rate on these tools is contemplated to be equal to the rate applicable to treasury bonds. One thing is sure to occur if the proposed step is made effective at this time of high inflation, which has abnormally pushed up the cost of living. It has already compelled the people to go on a search of ways to augment their incomes. This stressful compulsion and the simultaneous reduction of income from future saving fools would be mutually antagonistic as far as savers' interest is concerned. It might induce potential savers to use their cash holdings to negotiate ways to earn more in some other ways to have their two ends met. Obviously, saving as a matter of habit will be discouraged in the process.
If a contractionary monetary policy is an effective measure to tame inflation under certain conditions, encouragement of saving in such a situation with relatively lucrative rate of interest is also a prudent option. Surely, this step is wiser as it is always popular. In this situation, the reduction in rate of interest on deposits or savings, in whatever forms these are kept, will not be considered not an appropriate move. Rather, such a proposal or suggestion, even by the multilateral capital donors, will be a risky measure for the government to implement at a delicate time, as this country is in now. Equating big savers in possession of huge surplus money, who buy treasury bonds, with the small savers, who are numerous but poor, and hardly ever buy treasury bonds or enter into the share market, may mean government would rely less on caged birds than on those which would remain beyond its control, in the bush. Money acquired in lieu of yearly payment of less than one eighth of a deposited cash as interest, through saving tools for fixed terms, are as good as the money in the exchequer. The government can spend it without provoking noise and public outcry, unlike on occasions when it borrows outright from the banks.
As a result of the immediate combined effects of the current anti-corruption drive, efforts at cleansing politics, drives for augmenting revenue from income tax and soaring prices of essentials, a significant erosion of confidence has taken in business. Should prospective savers' annoyance be created now and they be driven suddenly on the uncertain course of seeking to augment income in whatever ways possible? All concerned do need to appreciate that universalised application of economic theories ignoring the specific conditions of a local situation is a wrong practice. The government should also appreciate the risk involved in following suggestions, emanating from one-dimensional thoughts. The country is now at such a delicate stage when precluding economic instability will be far better and wiser than handling it.