Trying to give a boost to the plummeting economy, Finance Minister Nirmala Sitharaman on Monday announced two proposals -- Leave Travel Concession (LTC) Cash Voucher Scheme and Special Festival Advance Scheme -- to stimulate consumer demand.
This comes a few hours ahead of the crucial 43rd Goods and Services Tax (GST) Council meeting to be chaired by Union Finance Minister Nirmala Sitharaman.
The Finance Minister is addressing at a time when the country's GDP had contracted 23.9 per cent during the April-June quarter. This quarter took the hardest hit of coronavirus-induced lockdown across the country. The Reserve Bank of India has predicted that the whole financial year's GDP would shrink 9.5 per cent in the current fiscal.
"The COVID-19 pandemic has adversely affected the economy. The needs of the poor and weaker sections were addressed in various announcements by the government. Supply constraints have somewhat got eased but consumer demand still needs to be given a boost," Sitharaman said during a press conference.
"The proposals being presented are designed in a way that they can stimulate demand by front-loading/advancing some of the expenditure with some offsetting changes. Others are directly linked to an increase in the GDP," she explained.
Sitharaman said there are indications that savings of government and organised sector employees have increased, "We want to incentivise such people to boost demand for the benefit of the less fortunate. We are presenting two proposals -- the Leave Travel Concession (LTC) Cash Voucher Scheme and Special Festival Advance Scheme -- to stimulate consumer spending."
Finance Minister said under the LTC Cash Voucher Scheme, government employees can opt to receive cash amounting to leave encashment plus three times ticket fare, to buy items, which attract GST of 12 per cent or more. "Only digital transactions are allowed, GST invoice have to be produced," she said.
"The estimated cost of LTC Cash Voucher Scheme for central government is Rs 5,675 crore for PSBs and for PSUs it is Rs 1,900 crore. The tax concessions for LTC tickets are available for state government and private sector too, if they choose to give such facility, these employees too can benefit," she said.
"On a conservative basis, we expect the LTC Cash Voucher Scheme to generate additional consumer demand in the range of Rs 28,000 crore. The demand infusion in the economy by central government and PSUs will be approx Rs 19,000 crore. Even if 50 per cent of the states opt to give this facility, we think that this will bring in Rs 9,000 crore," she elaborated.
The Special Festival Advance Scheme for non-gazetted employees is being revived as a one-time measure, for gazetted employees too, Finance Minister said.
"All the central government 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," she said.
The interest free advance of Rs 10,000 under the Special Festival Advance Scheme to be paid back in 10 installments.
"The one-time disbursement of Special Festival Advance Scheme is expected to amount to Rs 4,000 crore. If it is given by all state governments, another Rs 8,000 crore is expected to be disbursed Employees can spend this on any festival," she added.
Finance Minister Nirmala Sitharaman will chair 43rd Goods and Services Tax (GST) Council meeting through video conferencing later in the day. (ANI)