Finance Minister Nirmala Sitharaman on Monday announced two schemes to incentivise consumer spending and boost the country’s GDP as part of the Centre’s fresh economic revival push. Sitharaman said the schemes announced today will specifically focus on boosting consumer spending and capital expenditure.
As part of increasing consumer spending, Sitharaman announced two schemes — LTC Cash Voucher Scheme and Special Festival Advance Scheme.
“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,” she said.
Under the LTC Cash Voucher scheme, government employees can opt to receive cash amount to leave encashment plus three times the ticket fare, to buy items which attract a GST of 12 per cent or more.
Sitharaman went on to say that only digital transactions will be allowed and a GST invoice will have to be produced.
“If Central government employees opt for it, this will cost around Rs 5,675 crore. The employees of PSBs and PSUs allowed to avail this facility, and for PSBs and PSUs the cost will be Rs 1,900 crores. The demand infusion in the economy by central govt and PSUs will be approx Rs 19,000 crore,” said Nirmala Sitharaman.
“Even if 50 per cent of the States opt to give this facility, we think that this will bring in Rs 9,000 crores,” she added. So the total benefit under the LTC Voucher scheme can be roughly Rs 28,000 crore. Another boost worth Rs 28,000 crore can be gained if the private sector chips in.
Sharing details about the Special Festival Advance schemes, Nirmala Sitharaman said that the scheme will be available up to March 31, 2021. It will be given as a prepaid RuPay card.
The Festival advance earlier from non-gazetted employees was at Rs 4,500. However, this was abolished under the 7th Pay Commission. But the government has planned to revive it as a one-time move to boost consumer spending.
It will be available for all central government employees and the amount that will be granted is Rs 10,000 crore.
“Special Festival Advance Scheme for non-gazetted employees is being revived as a one-time measure, for gazetted employees too. All central govt. employees can now get an interest-free advance of Rs 10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021,” Sitharaman said.
Sitharaman went on to say that the one-time disbursement of Special Festival Advance scheme is expected to amount to Rs 4,000 crore. “If given by all state governments, another Rs. 8,000 crores is expected to be disbursed. Employees can spend this on any festival,” the finance minister said.
“The interest-free advance of Rs 10,000 under the Special Festival Advance Scheme to be paid back in 10 instalments.”
Capital Expenditure boost to states
In an effort to boost capital expenditure, Finance Minister Nirmala Sithraman saif that the Centre has decided to offer interest-free 50-year loans to states to the tune of Rs 12,000 crore. The loans will consist of three components.
The first part is Rs 2,500 crore for North East (Rs 1,600 crore), and Rs 9,000 crore for Uttarakhand and Himachal Pradesh. The second part involves Rs 7,500 crore for other states in proportion to share in Finance Commission devolution.
At least 50 per cent of the loan will be granted initially and the balance will be allotted after use of the first instalment. It may be noted that the unutilised funds may be re-allocated.
The last part of the capital expenditure boost is Rs 2,000 crore for states which meet at least three out of four reforms mentioned under the Aatmanirbhar fiscal deficit package.