Tuesday, December 7, 2021
Home Politics Finance Minister Nirmala Sitharaman Unveils New Proposals To Stimulate Economic Demand

Finance Minister Nirmala Sitharaman Unveils New Proposals To Stimulate Economic Demand

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New Delhi: Finance Minister Nirmala Sitharaman unveiled new proposals to stimulate demand in the economy hit during the COVID-19 pandemic.

Sitharaman, addressing a press conference, said that she has broadly classified the proposals into two different compartments — consumer spending and capital expenditure.

“There is no gain saying that the pandemic has affected the economy adversely. The needs of the weaker and poor sections have been addressed somewhat in the various packages announced so far. Supply constraints have somewhat eased but consumer demand still needs to be given a bit of a boost. The proposals presented today are defined in such a way — by frontloading some expenditure or advancing some expenditure with some offsetting charges later. The others are directly linked to an increase in the GDP,” she said.

Consumer Spending Proposals

The Finance Minister said that the consumer spending proposals include a LTC Cash Vouchers scheme and a special festival advance scheme.

The scheme is mainly targetted to employees in the government and other organised sectors.

The Minister described the scheme as follows: “Government and many organised sector employees have their jobs and salaries protected and some initial indications suggest savings have increased as many couldn’t spend their usual expenditure during the lockdown.”

“Central government employees, in a block of four years — between 2017-18 and 2020-21 — employees would have normally availed of one leave travel concession for any destination of their choice plus one visit to their hometown. If they didn’t choose leave travel to one destination of their choice, they would usually go twice to their native village. This would mean air or rail fare as per their pay scale is reimbursed to them. In addition, they also get ten days of leave encashment, which they pay tax on. The travel fare is tax exempt,” she added.

The scheme is all same, but now they can include travel as well.

“Many of them don’t want to because of COVID-19. Instead, what we are offering is to give the money to them based on three slabs — as per government rules and procedures — they could spend it to buy something of their choice. These are flat rate slabs equivalent to the round ticket fare they would have spent. This must be spent on items that have 12% GST or more; for instance, you cannot use it to buy food that has 5% GST slab. You can only spend them in digital mode only, no cash payments,” explained Sitharaman.

“You will also have to buy only from GST-registered sellers so a GST invoice would be required on the basis of which they will be reimbursed. This spending has to be completed by March 31, 2021,” she said.

She also said that it is a way to incentivise those whose jobs have not been affected due to the pandemic to contribute to revival of demand for the benefit of the less fortunate.

Three times the amount equivalent to the return air/rail fare would have to be spent to qualify for this.

It would cost ₹5,675 crore if the Central Government employees opt for it.

Public sector employees can also avail this, which would cost ₹1,900 crore that they would have got as LTC anyway.

She added that it is for the State governments and the private sector companies too. “So if they choose to give such things to their employees, they will also get the same benefit that central employees would get. According to our estimates, the demand infusion into the economy from the Centre and PSUs would be ₹19,000 crore. If 50% of States join in this, this could spur further demand of ₹9,000 crore. These are conservative estimates,” Sitharaman said.

“States have their own LTC rules and they can come up with variations in the scheme. So additional consumer demand generated, we expect, would be in the range of ₹28,000 crore.”

Special Festival Advance Scheme

The Special Festival Advance Scheme spur consumer spending.

Till the Sixth Pay Commission, there was a festival advance scheme in which the highest level of advance was was ₹4,500 per non-gazetted officers. However, there was no such scheme in the Seventh Pay Commission. We are now reviving it as a one-time affair,” said the Finance Minister.

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