Ministry of Finance
Union Finance Minister announces Stimulus to boost Demand
in the Economy: Highlights
“Total demand boost due to today's measures expected to be more than ? 1 lakh
crore”
Posted On: 12 OCT 2020 2:29PM by PIB Mumbai
Mumbai / New Delhi, 12 October 2020
1) Measures to Stimulate
Consumer Spending
Proposals
to stimulate consumer spending has two components
·
LTC
Cash Voucher Scheme
·
Special
Festival Advance Scheme
1A)
LTC Cash Voucher Scheme
Under
LTC Cash Voucher Scheme, the Government has decided to give cash payment to
employees in lieu of one LTC during 2018-21, in which full payment on Leave
encashment and tax-free payment of LTC fare in 3 flat-rate slabs depending on
class of entitlement will be given. 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 items bought should be those attracting
GST of 12% or more. Only digital transactions are allowed, GST Invoice to be
produced.
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.
Estimated
cost of LTC Cash Voucher Scheme: For Central govt. : ? 5,675 crore; for PSBs
& PSUs: ? 1,900 crore.
Tax
concessions for LTC tickets available for state govt. & private sector too,
if they choose to give such facility, these employees too can benefit
Indications
are that savings of govt. and organized sector employees have increased, we
want to incentivize such people to boost demand for the benefit of the less
fortunate. On a conservative basis, we expect the LTC Cash Voucher Scheme to
generate additional consumer demand in the range of ? 28,000 crore.
– Union Finance Minister Smt. Nirmala
Sitharaman
1B)
Special Festival Advance Scheme
Special
Festival Advance Scheme which was meant for non-gazetted government employees
is being revived as a one-time measure, for gazetted employees too. All central
govt. employees can now get interest-free advance of Rs. 10,000, in the form of
a prepaid RuPay Card, to be spent by March 31, 2021.
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 crore
is expected to be disbursed. Employees can spend this on any festival.
2) Measures to Stimulate Capital
Expenditure
2A)
Capital Expenditure Boost for States
A
special interest-free 50-year loan to states is being issued, for ? 12,000
crore capital expenditure
·
?
200 crore each for 8 North East states
·
?
450 crore each Uttarakhand, Himachal
·
?
7,500 crore for remaining states, as per share of Finance Commission’s
devolution
All
the above 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%.
Under
Part 3 of ? 12,000 crore interest-free loans to states, ? 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. This is over and above other borrowing ceilings.
Capital
expenditure - money spent on infrastructure and asset creation - has a
multiplier effect on the economy, it not only improves current GDP but also
future GDP, we want to give a new thrust to capital expenditure of both states
and Centre
– Union Finance Minister Smt. Nirmala Sitharaman
2B)
Capital Expenditure Boost for the Centre
Additional
budget of ? 25,000 crore (in addition to ? 4.13 lakh crore given in Budget
2020-‘21) is being provided for capital expenditure on roads, defence, water
supply, urban development and domestically produced capital equipment.
The
proposals to stimulate demand are designed to stimulate demand in a fiscally
prudent way - some of them involve advancing of expenditure, with offsetting
changes later - others are directly linked to increasing GDP
– Union Finance Minister Smt. Nirmala
Sitharaman
Estimated
Impact of Stimulus Measures
We
estimate that the measures announced today, for boosting consumer spending and
capital expenditure, will boost demand by ? 73,000 crore, to be spent by March
31, 2021. Given that private sector spending through LTC tax benefit would be
at least ? 28,000 crore, we estimate total demand boost due to today's measures
to be more than ? 1 lakh crore.
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.
– Union Finance Minister Smt. Nirmala
Sitharaman
The presentation given by Union Finance Minister can be accessed here.
* * *
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