To stimulate consumer demand, Finance Minister Nirmala Sitharaman on Monday announced an LTC cash voucher scheme and a special festival advance of Rs 10,000 to all government employees, saying the Covid-19 pandemic had adversely affected the economy. Addressing a press conference, Sitharaman said the new proposals have been designed to stimulate demand in a fiscally prudent way by front-loading some expenditure.
“Indications are that the savings of government and organised sector employees have increased, we want to incentivise such people to boost demand for the benefit of the less fortunate,” Sitharaman said. Every four years, Central government employees get LTC to any destination to their choice plus one to their hometown.
The LTC Cash Voucher Scheme is the first part of the Modi Govt’s plan to spur consumer demand. (1/2) pic.twitter.com/V2V5UA7Jdl
— NSitharamanOffice (@nsitharamanoffc) October 12, 2020
Under the LTC Cash Voucher scheme, government employees can opt to receive cash amounting to leave encashment plus three times ticket fare to buy items that attract GST of 12 per cent or more. “However, only digital transactions will be allowed and GST invoice to be produced,” Sitharaman said.
The Finance Minister said the LTC Cash Voucher Scheme is expected to generate additional consumer demand in the range of Rs 28,000 crore. “Central government payout on cash-in-lieu-for-LTC will be Rs 5,675 crore, and another Rs 1,900 crore will be payout by central PSUs and public sector banks,” she said.
Moreover, all Central government employees can avail an interest-free advance of Rs 10,000 in the form of a prepaid RuPay Card. The one-time disbursement is expected to amount to Rs 4,000 crore. If given by all state governments, another Rs 8,000 crore is expected to be disbursed.
“The interest-free advance of Rs 10,000, to be spent by March 31, 2021, is to be paid back in 10 instalments. The government will bear the bank charges in this regard,” Sitharaman said.
Sitharman also announced a Rs 12,000 crore interest-free 50-year loan to states for spending on capital projects in a bid to bring economic activities back on track. Out of the Rs 12,000 crore, Rs 1,600 crore will be given to north-eastern states and Rs 900 crore will be for Uttrakhand and Himachal Pradesh while Rs 7,500 crore will be for the remaining states. The remaining Rs 2,000 crore will be given to states that fulfill pre-stated reforms, Sitharaman said.
“The loan will have to be spent entirely on new or ongoing capital projects. States can settle bills of contractors and suppliers but all the amount has to be paid before March 31, 2021,” the minister said.
An additional capital expenditure of Rs 25,000 crore would be spent by the Centre on developing roads, defence infrastructure, water supply and urban development, Sitharaman said. This will be in addition to Rs 4.13 lakh crore already budgeted.
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