Financial Stimulus

#GS3 #Economy 


Union Minister for Finance Smt. Nirmala Sitharaman here today 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.


Proposals by the Finance Minister 

  • 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 increases in GDP.


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 the 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.


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 an 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 crores is expected to be disbursed. Employees can spend this on any festival.


Capital Expenditure Boost for States 

  • A special interest-free 50-year loan to states is being issued, for ₹12,000 crore capital expenditure –
  • ₹ 200 crores each for 8 North East States
  • ₹ 450 crores each for Uttarakhand and Himachal Pradesh
  • ₹ 7,500 crores 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 utilisation of first 50%.
  • Under Part 3 of ₹ 12,000 crore interest-free loans to states, ₹ 2,000 crores will be given to those states which fulfil at least 3 out of 4 reforms spelt out in Aatma Nirbhar Bharat package. This is over and above other borrowing ceilings.


Capital Expenditure Boost for the Centre 

  • An additional budget of ₹ 25,000 crores (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.
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