New Delhi: Vehemently opposing Trade Unions' demand for hiking EPF (Employees Provident Fund) rates to 12 per cent, India Inc today (June 25) said small savings and provident fund rates need to be trimmed in the Budget, as artificially high rates was discouraging investments.

Responding to a questionnaire sent by PTI, industry captains and economists have warned Government that high interest rates on some savings schemes was not sustainable and can have an adverse impact on the economy.

Most of the economists and industry chambers also mooted a "targeted subsidy" on a wide variety of pension and insurance products to provide a safety net to the poor.

"Deregulate the administered interest rate on small savings and provident funds as the present system is subsidising middle class at the cost of the poor," FICCI (Federation of Indian Chambers of Commerce and Industry) said.

CII (Confederation of Indian Industry) said, "Interest rates in the economy are higher than they would otherwise have been. This has adverse effects on cost of borrowing and discourage investments."

Pointing out that providing guaranteed return to all savers is out of line with returns available elsewhere and hence not sustainable, CII said, "This policy of keeping rates artificially high, can have serious macro-economic consequences and should be reconsidered."

Excluding EPF rates, ASSOCHAM (Associated Chambers of Commerce and Industry) said, "Small savings rates should be brought down in line with falling inflation."

Credit rating agency ICRA said, "The interest rates on Government papers are much lower than administered rates on provident funds and small savings, which are also perceived as risk-free. Thus to continue with high rates on these debt instruments appears untenable."