The Govt Wants You to Spend; Announces Festival Advance to Boost Consumer Spending
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Centre’s new economic revival package announced by finance minister Nirmala Sitharaman on Monday has sent the message loud and clear—spend to boost the economic growth crippled by the Covid-19 pandemic.
With about 21 million salaried jobs lost, as per Centre for Monitoring Indian Economy (CMIE), and self-employed professionals cash-dry, consumers are still shying away from spending on non-essentials. Even as lockdown restrictions lift and we approach the festive season, data shows consumer spending continues to remain tepid due to the economic uncertainty created by the spread of Covid-19.
The government’s fresh package consists of schemes that aim to stimulate consumer spending and in turn boost the country’s GDP.
FM Sitharaman noted that the schemes are designed in a way that they stimulate demand by advancing some of the expenditures while others are directly linked to an increase in the GDP.
To encourage consumer spending, Sitharaman announced two schemes— a leave travel concession (LTC) cash voucher and special festive advance—mainly aimed at benefitting central government employees.
The LTC cash voucher enables government employees who are eligible to claim LTC to avail leave encashment in place of travel expenses, to buy items that attract 12 per cent or more GST.
"If central government employees opt for it, this will cost around INR 5,675 crore. The employees of PSBs and PSUs allowed to avail this facility, and for PSBs and PSUs the cost will be INR 1,900 crores. The demand infusion in the economy by the central government and PSUs will be approx INR 19,000 crore," said FM Sitharaman.
Under the special festival advance scheme, government employees can avail of an interest free advance of INR 10,000. However, the advance will not be handed out as cash but will be issued as a prepaid RuPay card that can only be used to make purchases.
This advance is available till March 2021 and has to be paid back in up to 10 installments.
FM Sitharaman said INR 4,000 crore is expected to be disbursed under this scheme. "If given by all state governments, another INR 8,000 crores is expected to be disbursed. Employees can spend this on any festival," she added.
"We estimate that the measures announced today, for boosting consumer spending and capital expenditure will boost demand by INR 73,000 crore, to be spent by March 31, 2021," she said.