Tag Archives: economy

stimulus to boost demand in economy


1) Measures to Stimulate Consumer Spending

Proposals to stimulate consumer spending has two components

  • LTC Cash Voucher Scheme
  • Special Festival Advance Scheme

1A) 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 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.

Tax concessions for LTC tickets available for state govt. & private sector too, if they choose to give such facility, these employees too can benefit

Indications are that savings of govt. and organized sector employees have increased, we want to incentivize such people to boost demand for the benefit of the less fortunate. On a conservative basis, we expect the LTC Cash Voucher Scheme to generate additional consumer demand in the range of ₹ 28,000 crore.

1B) 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 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 crore is expected to be disbursed. Employees can spend this on any festival.

2) Measures to Stimulate Capital Expenditure

2A) Capital Expenditure Boost for States

A special interest-free 50-year loan to states is being issued, for ₹ 12,000 crore capital expenditure

  • ₹ 200 crore each for 8 North East states
  • ₹ 450 crore each Uttarakhand, Himachal
  • ₹ 7,500 crore 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 utilization of first 50%.

Under Part 3 of ₹ 12,000 crore interest-free loans to states, ₹ 2,000 crore will be given to those states which fulfill at least 3 out of 4 reforms spelled out in Aatma Nirbhar Bharat package. This is over and above other borrowing ceilings.

Capital expenditure – money spent on infrastructure and asset creation – has a multiplier effect on the economy, it not only improves current GDP but also future GDP, we want to give a new thrust to capital expenditure of both states and Centre

2B) Capital Expenditure Boost for the Centre

Additional budget of ₹ 25,000 crore (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.

The proposals to stimulate demand are designed to stimulate demand in a fiscally prudent way – some of them involve advancing of expenditure, with offsetting changes later – others are directly linked to increasing GDP

Estimated Impact of Stimulus Measures

We estimate that the measures announced today, for boosting consumer spending and capital expenditure, will boost demand by ₹ 73,000 crore, to be spent by March 31, 2021. Given that private sector spending through LTC tax benefit would be at least ₹ 28,000 crore, we estimate total demand boost due to today’s measures to be more than ₹ 1 lakh crore.

If demand goes up based on the stimulus measures announced today, it will have an impact on those people who have been affected by COVID-19 and are desperately looking for demand to keep their business going.

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Mission Begin Again – Maharashtra

Maharashtra government has announced the next round of Mission Begin Again measures in the state from 1st September, 2020.

What has been allowed is

30% attendance is allowed in private offices, but metro is not allowed though MHA has contemplated starting metro operations from 7th september onwards, Maha govt. has not allowed that. If 30% of the staff are allowed to travel to work, how will they travel? I have seen that travelling by BEST buses is next to impossible because there is lot of queues in the bus stops, there is virtually no social distancing taking place in the bus stops. Plus BEST buses allow only one person to sit per seat. This logic i am not able to understand. When airlines are allowing all 6 seats in a row including the middle seat, why is BEST not allowing two people to sit on the seats. With the result, what is happening is that travelling by BEST buses has become extremely difficult and dangerous too, due to covid and non existence of social distancing taking place.

MHA had allowed sports events upto 100 persons participating with proper social distancing, masks etc. but Maha govt. has not allowed that.

Schools, colleges will be closed upto 30th September, and so will cinema halls, swimming pools, International air travel (this should have been allowed selectively), bars, auditoriums, assembly halls etc. Places of worship continues to remain closed.

Hotels and lodges will be allowed to operate at 100% capacity. No restriction on inter-district movement of goods & persons. Passenger movement by private bus/ mini bus allowed. All from 2nd September 2020 onwards.

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