Finance Minister Announces Measures of Rs
73,000 crore to Stimulate Consumer Spending Before End
of this Financial Year in Fight against COVID-19
·
Cash Payment and Leave Encashment in lieu of one LTC during
2018-21 according to Entitlement
·
Special Festival Advance Scheme Revived as a one-Time Measure
for both Gazetted and non-Gazetted
Employees
·
Special Interest Free 50-year Loans to States for Capital
Expenditure for Rs. 12,000 crore
·
Additional Budget of Rs. 25,000 crore,
in Addition to Rs. 4.13 lakh crore given in Union
Budget 2020, is being provided for Capital Expenditure
Union Minister for Finance & Corporate
Affairs Smt. Nirmala Sitharaman on 12 October 2020
announced measures of Rs 73,000 crore to stimulate consumer spending in the economy in
an effort to fight the slowdown due to COVID-19 pandemic following lockdown. Union Minister of State
for Finance & Corporate Affairs Anurag Singh Thakur, Finance Secretary Dr Ajay Bhushan Pandey,
Department of Financial Services Secretary Shri Debashish
Panda and Department of Economic Affairs Secretary Tarun
Bajaj were also present during the announcement of stimulus package.
While announcing the demand stimulus package,
Smt. Sitharaman said, “Indications are that savings
of government and organised sector employees have
increased and we want to incentivise such people to
boost demand for the benefit of the less fortunate.” The Finance Minister
further said that if demand goes up based on the stimulus measures announced
today, it will have an impact on those people who have been affected by
COVID-19 and are desperately looking for demand to keep their business going.
The Finance Minister stressed on the idea that
today’s solution should not cause tomorrow’s problem. Smt. Sitharaman
said that the Government does not want to burden the common citizen with future
inflation and also not put the Government debt on an unsustainable path.
The proposals presented today by the Finance
Minister are designed to stimulate spending in a fiscally prudent manner as
some of the proposals are for advancing or front-loading of expenditure with
offsetting changes later while others are directly linked to increase in GDP.
The present announcement by Smt. Sitharaman
highlights the active intervention by the Government of India to combat
economic slowdown created by COVID-19. The details are as follows: -
A.
CONSUMER SPENDING
i.
Leave Travel Concession
(LTC) Cash Voucher Scheme
While announcing the scheme, the Finance
Minister said, “The biggest incentive for employees to avail the LTC Cash
Voucher Scheme is that in a four-year block ending in 2021, the LTC not availed
will lapse, instead, this will encourage employees to avail of this facility to
buy goods which can help their families.”
Central Government employees get LTC in a
block of 4 years in which air or rail fare, as per pay scale/entitlement, is
reimbursed and in addition, Leave encashment of 10 days (pay + DA) is paid. But
due to COVID-19, employees are not in a position to avail of LTC in the current
block of 2018-21.
Therefore, the Government has decided to give
cash payment in lieu of one LTC during 2018-21, in which:
·
Full payment on Leave
encashment and
·
Payment of fare in 3
flat-rate slabs depending on class of entitlement
·
Fare payment will be tax
free
An employee, opting for this scheme, will be
required to buy goods / services worth 3 times the fare and 1 time the leave
encashment before 31st March 2021.
The scheme also requires that money must be
spent on goods attracting GST of 12% or more from a GST registered vendor
through digital mode. The employee is required to produce GST invoice to
avail the benefit.
If Central Government employees opt for it,
cost will be around Rs. 5,675 crore. Employees of
Public Sector Banks (PSBs) and Public Sector Undertakings (PSUs) will also be
allowed this facility and the estimated cost for them will be Rs. 1,900 crore. The tax concession will be allowed for
State Government/Private Sector too, for employees who currently are
entitled to LTC, subject to following the guidelines of the Central Government
scheme. The demand infusion in the economy by Central Government and Central
PSE/PSB employees is estimated to be Rs. 19,000 crore
approx. The demand infusion by State Government employees will be Rs. 9,000 crore. It is expected that it will generate
additional consumer demand of Rs. 28,000 crore.
ii.
Special Festival Advance
Scheme
A Special Festival Advance Scheme for non-gazetted employees, as well as for gazetted
employees too, is being revived as a one-time measure to stimulate
demand. All Central Government employees can now get an interest-free
advance of Rs. 10,000, to be spent by 31st
March, 2021 on the choice of festival of the employee. The interest-free
advance is recoverable from the employee in maximum 10 instalments.
The employees will get pre-loaded RuPay Card of the advance value. The Government will
bear Bank charges of the card. Disbursal of advance through RuPay
card ensures digital mode of payment, resulting in tax revenue and encouraging
honest businesses.
The one-time disbursement of Special Festival
Advance Scheme (SFAS) is expected to amount to Rs.
4,000 crore; and if the SFAS given by all State Governments, another tranche of
Rs. 8,000 crore is expected to be disbursed.
B.
CAPITAL EXPENDITURE
i.
Special Assistance to the
States:
While announcing measures related to Capital
Expenditure, Smt. Sitharaman said that money spent on
infrastructure and asset creation has a multiplier effect on the economy. It
not only improves current GDP but also future GDP. The Government wants to give
a new thrust to Capital Expenditure of both States and Centre.
Giving a new thrust on Capital Expenditure,
Smt. Sitharaman said that money spent on
infrastructure and asset creation has a multiplier effect on the economy. It
not only improves current GDP but also future GDP. The Government wants to give
a new thrust to Capital Expenditure of both States and Centre. Smt. Sitharaman said that the Central Government is issuing a
special interest-free 50-year loan to States of Rs.
12,000 crore Capital Expenditure. The Scheme consists of 3 Parts.
Part - 1 of the
scheme provides for:
·
Rs. 200 crore each for 8 North East states (Rs.
1,600 crore)
·
Rs. 450 crore each Uttarakhand, Himachal
Pradesh (Rs. 900 crore)
Part - 2 of the scheme provides for:
·
Rs. 7,500 crore for remaining states, as per 15th
Finance Commission devolution.
The Finance Minister said that both Part 1 and
Part 2 of interest-free loans given to States are to be spent by 31st
March, 2021 and 50% will be given initially, the remaining 50% will be given
upon utilization of first 50%. Unutilised funds will
be reallocated by the Central Government.
Under Part - 3 of Rs. 12,000 crore interest-free
loans to states, Rs. 2,000 crore will be
given to those states which fulfill at least 3 out of 4 reforms spelled out in
Aatma Nirbhar Bharat Package (ANBP) vide Department of Expenditure’s Letter F.No. 40(06)/PF-S/17-18 Vol. V dated 17th May
2020. Rs 2,000 crore is over and above other
borrowing ceilings.
Following are the features of this Scheme:
·
It can be used for new
or ongoing capital projects needing funds and / or settling contractors’/
suppliers’ bills on such projects
·
CAPEX to be spent by
31st March 2021
·
This funding will be over
and above all other additional borrowing ceilings given to states
·
Bullet repayment after 50 years, no servicing required for 50 years
ii.
Enhanced Budget Provisions:
The Finance Minister said that additional
budget of Rs. 25,000 crore, in addition to Rs. 4.13 lakh crore given in Union Budget 2020, is being
provided for Capital Expenditure on roads, defence,
water supply, urban development and domestically produced capital equipment.
To allow smooth conducting of Government
business, allocations will be made in forthcoming Revised Estimate discussions
of Ministry of Finance with concerned ministries.
It may be recalled that a package of Rs 1.70 lakh crore under Pradhan Mantri
Garib Kalyan Package
(PMGKP) was announced on 26th March, 2020 and the Aatma Nirbhar
Bharat Package (ANBP), a Special economic and comprehensive package of Rs 20 lakh crore - equivalent to 10% of India’s GDP – was
announced on 12th May, 2020 by Hon’ble Prime Minister Shri Narendra
Modi. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement and also outlined five pillars
of Aatmanirbhar Bharat – Economy, Infrastructure,
System, Vibrant Demography and Demand.