COVID-19: Finance Minister announces measures of Rs 73,000 crore to stimulate consumer spending before end of Financial Year

Union Minister of State for Finance & Corporate Affairs Anurag Singh Thakur, Finance Secretary Dr Ajay Bhushan Pandey, Department of Financial Services Secretary Debashish Panda and Department of Economic Affairs Secretary Tarun Bajaj were also present during the announcement of stimulus package.

While announcing the demand stimulus package, Sitharaman said, “Indications are that savings of government and organised sector employees have increased and we want to incentivise such people to boost demand for the benefit of the less fortunate.”

The Finance Minister further said that 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.

The Finance Minister stressed on the idea that today’s solution should not cause tomorrow’s problem.

Sitharaman said that the Government does not want to burden the common citizen with future inflation and also not put the Government debt on an unsustainable path.

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 increase in GDP.

The present announcement by Sitharaman highlights the active intervention by the Government of India to combat economic slowdown created by COVID-19. The details are as follows:

Leave Travel Concession (LTC) Cash Voucher Scheme

While announcing the scheme, the Finance Minister said, “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.”

Central Government employees get LTC in a block of 4 years in which air or rail fare, as per pay scale/entitlement, is reimbursed and in addition, Leave encashment of 10 days (pay + DA) is paid. But due to COVID-19, employees are not in a position to avail of LTC in the current block of 2018-21. 

Therefore, the Government has decided to give cash payment in lieu of one LTC during 2018-21, in which: 

Full payment on Leave encashment and
Payment of fare in 3 flat-rate slabs depending on class of entitlement
Fare payment will be tax free 

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 scheme also requires that money must be spent on goods attracting GST of 12% or more from a GST registered vendor through digital mode. The employee is required to produce GST invoice to avail the benefit.

If Central Government employees opt for it, cost will be around Rs. 5,675 crore.

Employees of Public Sector Banks (PSBs) and Public Sector Undertakings (PSUs) will also be allowed this facility and the estimated cost for them will be Rs. 1,900 crore.

The tax concession will be allowed for State Government/Private Sector too, for employees who currently are entitled to LTC, subject to following the guidelines of the Central Government scheme.

The demand infusion in the economy by Central Government and Central PSE/PSB employees is estimated to be Rs. 19,000 crore approx.

The demand infusion by State Government employees will be Rs. 9,000 crore. It is expected that it will generate additional consumer demand of Rs. 28,000 crore.