Prime Minister Narendra Modi praised Union Finance Minister Nirmala Sitharaman on Monday after she announced measures worth 73 billion rupees to stimulate consumer spending in the economy in an effort to combat the slowdown due to to the coronavirus pandemic.
“Today’s announcements from FM @nsitharaman Ji are timely moves that will boost spending and consumer confidence, as well as boost capex. These steps will also boost demand in our economy, ”Prime Minister Modi tweeted.
Sitharaman’s 73 billion rupee package included the advance payment of a portion of the salaries to central government employees and cash in lieu of the Leave Travel Grant (LTC). He said that up to Rs 11,575 crore would be paid as LTC allowance and would be advanced to these employees on the condition that they spend the amount on non-essential goods by March 31 next year.
She said the government will give its employees income tax-exempt cash vouchers in lieu of their eligible travel allowances this year. This cash will have to be spent on the purchase of goods attracting 12% or more of GST, in a condition that eliminates the possibility that the cash will be spent on essential items. The government will also grant a one-off salary loan of Rs 10,000 to all its officials and employees in advance of the festival.
Read also | LTC Cash Voucher Scheme – Everything You Need To Know About It
“All these measures are likely to create an additional demand of Rs 73,000 crore,” Sitharaman said, adding that the proposals would stimulate demand in a “fiscally prudent manner.”
The states would be separately eligible to obtain Rs 12,000 crore in 50-year interest-free loans for capital expenditures, while the Union government will spend an additional Rs 2,500 crore on capital expenditures on roads, defense infrastructure, water supply and urban Development.
The government, which announced a Rs 20 lakh crore stimulus package ‘Aatmanirbhar Bharat’ in May, is moving forward with a full opening to try to boost the economy ahead of the often high-spending festival season.
A harsh blockade imposed to slow the spread of the coronavirus had caused GDP to contract by a record 23.9 percent during April-June. Analysts have predicted that the economy could head for its worst contraction this fiscal year.
“Government measures to stimulate demand should not burden the common citizen with future inflation. We also took into account that you should not put public debt on an unsustainable path. Today’s solution should not cause tomorrow’s problem, ”he said at a press conference.
The finance minister said these two measures are expected to “create consumer demand of approximately Rs 28 billion.”
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