The Centre may miss this fiscal's small savings collection target, given the trend in collections under the Public Provident Fund and savings deposit schemes up to the end of February.

The trends are surprising as under the current interest rate regime, the Centre's small savings schemes offer the best possible rate of interest.

The only exception being the Varishta Pension Bima Yojana, which offers 9 per cent returns, but is open only to individuals above 55 years of age.

A recent survey by the National Council of Applied Economic Research on household savings and the investment behaviour of Indians has also shown that small investors' preference for these instruments has not diminished.

According to government officials, the substantial hike in the collection targets for this fiscal may be one of the reasons for the lower-than-estimated realisations.

While the PPF target has been hiked by over 26 per cent to Rs 12,700 crore (Rs 127 billion), the target for other savings schemes, including post office time deposits, has been raised 31 per cent to Rs 58,200 crore (Rs 582 billion).

On February 28, the actual realisations were Rs 7,802 crore (Rs 78.02 billion) from the PPF scheme, and Rs 51,391 crore (Rs 513.91 billion) from savings deposits. Thus, in order to meet the small savings collection target for this fiscal, the kitty must swell by Rs 11,707 crore (Rs 117.07 billion) [ Rs 4,896 crore (Rs 48.96 billion) from PPF and Rs 6,809 crore (Rs 68.09 billion) from small savings] in March.

According to experts, given the large tax incentives built into these schemes, investors put in most of their money into these by the end of February, and only the residual amount comes in March.

Since the last fiscal, the Centre has been transferring the entire collection from the small savings schemes to the states after subtracting the administrative charges.

States like West Bengal, Gujarat and Maharashtra, which account for the largest percentage of the collections from these schemes, use the money to finance their deficits.

Under the debt swap scheme agreed to by the states with the Centre and the Reserve Bank of India, 30 per cent of the total amount collected from these schemes will be used to terminate the high-cost debts of the states.

However, if the collections are lower than targeted, there will be less enthusiasm among the states for the debt swap scheme.