New Delhi, Mar 20 (PTI): Under flak over slashing interest rates on small saving schemes, Finance Minister Arun Jaitley today defended the move, saying the country has to move towards lower interest rates to make the economy more efficient rather than sluggish.

He also hoped for the passage of bankruptcy and GST bills in the second half of the Budget Session, saying differences on the GST bill seem to be "narrowing down" and he, along with Parliamentary Affairs Minister Venkaiah Naidu, will make "more efforts" to bring the Congress on board.

Speaking to reporters at the BJP national executive meet here, he said interest rates on small saving schemes were "formula based" and the government uses its resources to give subsidy on these schemes, above the rates determined by the market.

Rejecting the criticism of Congress Vice President Rahul Gandhi for reducing interest rates on PPF and senior citizen saving schemes among others, Jaitley said the UPA government also went by the same formula but the rates were high during its time due to a sluggish economy.

"The formula has been there for long, we did not make it. The market determines the interest rate and government gives subsidy on its securities, including saving schemes, above it. We give it in PPF, we give a little more on senior citizen schemes. It's formula driven, it's linked to the market.

"Interest rates had risen a lot earlier but now they have come down. The way economy is moving today, we cannot have a situation where lending rates are going down but deposit rates remain high. Both are linked. To make economy more efficient rather than sluggish, the country has to move towards lower interest rates in both," the Finance Minister said.

The PPF interest rate at 8.1 per cent remains "reasonably lucrative", he said, adding nowhere in the world, interest rate is so high. As it is tax free, the actual earning is close to 11.12 per cent, Jaitley said.

He also defended the proposal of one per cent excise duty on gold jewellery, he said luxury items must come under taxation system as the country is moving towards GST system.

Jewellers were concerned about harassment from tax officials and "I fully agree that it should not happen," he said. Jewellers had yesterday called off their 18-day old strike to demand rollback of proposed excise duty on non- silver jewellery.