Finance Minister Nirmala Sitharaman has announced a slew of measures to stimulate the slowing economy in the wake of coronavirus-induced lockdown.
Addressing the economic issues, Sitharaman today convened a press conference wherein she announced that Rs 10,000 will be granted as festival advance to its employees to provide an impetus to demand in the country.
The government expects the scheme to cost Rs 4,000 crore. Sitharaman added that employees can spend it on any festival of their choosing and if the state governments also agree for disbursement, another Rs 8,000 crore is expected to be disbursed.
2nd part of the Modi Govt's plan to boost consumer demand is a one-time restoration of the festival advance for central govt employees through the Special Festival Advance Scheme.— Office of Mr. Anurag Thakur (@Anurag_Office) October 12, 2020
Expected to generate at least about Rs 8,000 crore of demand.@FinMinIndia pic.twitter.com/D7wuLfoVkf
“The proposals being presented are designed in a way that they can stimulate demand by front-loading/advancing some of the expenditure with some offsetting changes. Others are directly linked to an increase in the GDP,” Sitharaman said before announcing the measures.
Acknowledging that the pandemic had an adverse impact on economy, Sitharaman said that the government has taken into consideration the hardships suffered by the poorer and weaker sections of the society in formulating the policies providing fiscal stimulus. She added that supply constraints have somewhat eased but demand still needs to be provided with a boost.
LTC cash voucher scheme announced for government employees
To spur consumer demand, the government has added a provision under the LTC cash voucher scheme for the government employees to opt for receiving cash amounting to leave encashment plus 3 times ticket fare, to buy items which attract GST of 12% or more. However, only digital transactions are allowed under the provision and GST invoice will have to be produced, she added.
Since central government employees will not be able to avail the LTC under the 2018-21 block due to the coronavirus pandemic, the LTC cash voucher scheme will enable them to encash their leaves and obtain the travel fare. The cash earned will not be taxed.
The government expects the LTC cash voucher scheme to generate additional consumer demand in the range of Rs 28,000 crore.
Government announces measures to boost Capital Expenditure by providing interest-free loans to states
The Finance Minister noted that Capital Expenditure—money spent on infrastructure and asset creation—has a multiplier effect on the economy and serves to increase not only the current GDP but the future GDP as well.
The second portion of the Modi Govt's plan to generate demand is to do with infrastructure creation. A part of that is a Rs 12,000 crore incentivise to States to increase their capital expenditure. (1/4) pic.twitter.com/NCf1MUSEyA— NSitharamanOffice (@nsitharamanoffc) October 12, 2020
The government has announced Interest-free 50-year loans for states, earmarking Rs 2500 crore for the North-east states, Rs 900 crore for Himachal and Uttarakhand in the first leg. In second part, the government has allocated Rs 7,500 crore for other states and in Part 3-Rs 2,000 crore for states which meet at least 3 out of 4 reforms given in Atma Nirbhar fiscal deficit package.
“Both Part 1 and Part 2 of interest-free loans given to states are to be spent by March 31, 2021. 50% will be given initially, remaining upon utilization of first 50%,” Sitharaman said.