Sitharaman announces incentives for Govt employees, interest-free 50-year loans for states

Ahead of the festive season, Union Finance Minister Nirmala Sitharaman on Monday addressed a press conference announcing an array of incentives for government employees in order to boost consumer spending in the country. "The proposals being presented are designed in a way that they can stimulate demand by front-loading and advancing some of the expenditure with some offsetting changes. Others are directly linked to an increase in the GDP," said FM Sitharaman at the start of the press brief. 

Changes under Consumer spending

To boost consumer spending, Nirmala Sitharaman has announced measures under two major schemes directed towards government employees.

• LTC Cash Voucher

"Under LTC Cash Voucher Scheme, government employees can opt to receive cash amounting to leave encashment plus 3 times ticket fare, to buy items which attract GST of 12% or more. Only digital transactions will be allowed and GST invoice to be produced," said Sitharaman.

The Finance Minister added that if Central govt employees opt for the scheme, the cost would come up to Rs 5,675cr. Employees of PSBs & PSUs will also be allowed to avail this facility, and for PSBs & PSUs the cost will be Rs 1,900 crores. "The demand infusion in the economy by central govt & PSUs will be approx Rs 19,000 cr. Even if 50% of the States opt to give this facility, we think that this will bring in Rs 9000 crores," revealed Sitharaman.

• Special Festival Advance Scheme

The other changes have been introduced under the Special Festival Advance Scheme. Under this, interest-free advance of Rs 10,000 would be given as one-time measure and employees would be allowed to pay it back in 10 installments.

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Special Assistance to states

Meanwhile, in order to boost the capital expenditure of the states, the Finance Minister announced that the Centre would offer interest-free 50-year loans to states to the tune of Rs 12,000 crore. This has been expanded in three components.

• The first part would be Rs 2,500 crore for North East and Rs 9,000 crore for Uttarakhand and Himachal Pradesh. 
• The second part would be Rs 7,500 crore for other states in proportion to share in Finance Commission devolution.
• The third part would be an expenditure boost of Rs 2000 crore for states which meet at least three reforms under the Aatmanirbhar fiscal deficit package.

"We estimate that the measures announced today, for boosting consumer spending and capital expenditure, will boost demand by Rs 73,000 crores, to be spent by March 31, 2021," said Finance Minister Nirmala Sitharaman.

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(With Agency Inputs)