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FM Sitharaman Announces Festival Advance to Boost Consumer Spending

FM Sitharaman Announces Festival Advance to Boost Consumer Spending

To encourage consumer spending, Sitharaman announced two schemes- a leave travel concession (LTC) cash voucher and special festive advance-mainly aimed at benefitting central government employees

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Centre’s new economic revival package announced by finance minister Nirmala Sitharaman on Monday has sent the message loud and clear—spend to boost the economic growth crippled by the Covid-19 pandemic.

With about 21 million salaried jobs lost, as per Centre for Monitoring Indian Economy (CMIE), and self-employed professionals cash-dry, consumers are still shying away from spending on non-essentials. Even as lockdown restrictions lift and we approach the festive season, data shows consumer spending continues to remain tepid due to the economic uncertainty created by the spread of Covid-19.

The government’s fresh package consists of schemes that aim to stimulate consumer spending and in turn boost the country’s GDP.

FM Sitharaman noted that the schemes are designed in a way that they stimulate demand by advancing some of the expenditures while others are directly linked to an increase in the GDP.

To encourage consumer spending, Sitharaman announced two schemes— a leave travel concession (LTC) cash voucher and special festive advance—mainly aimed at benefitting central government employees.

The LTC cash voucher enables government employees who are eligible to claim LTC to avail leave encashment in place of travel expenses, to buy items that attract 12 per cent or more GST.

“If central government employees opt for it, this will cost around INR 5,675 crore. The employees of PSBs and PSUs allowed to avail this facility, and for PSBs and PSUs the cost will be INR 1,900 crores. The demand infusion in the economy by the central government

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Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

  • Finance Minister Nirmala Sitharaman introduced two two schemes today to boost consumer spending in the Indian economy — the LTC Cash Voucher Scheme and the Special Festival Advance Scheme.
  • The LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs.
  • The new scheme will let employees use their fare allowance to purchase goods with 12% GST or more.

Finance Minister Nirmala Sitharaman is introducing new proposals to ‘stimulate demand in the economy’. According to her, the government’s previous policies addressed the needs of the poor. This time, the proposals are divided into two categories — consumer spending and capital expenditure.

“Supply constraints have somewhat eased, but consumer demand still needs to be given a bit of a boost,” she said.

Within consumer spending, there are two components — LTC Cash Voucher Scheme and the Special Festival Advance Scheme.

The Special Festival Advance Scheme was a part and parcel of government employees pay package up until the 6th Pay Commission. It’s introduction this year is a one-time come back to boost spending.

Impact of LTC Cash Voucher scheme:
Cost to central government ₹5,675 core
Cost to PSBs and PSUs ₹1,900 crore
Expected demand infusion by central government employees ₹19,000 crore
Expected demand infusion by state government employees ₹9,000 crore
Total expected addition consumer demand generation ₹28,000

“Our estimates are on the conservative side. We expect actual spend to be higher,” said Union Minister Tarun Bajaj.

LTC Cash Voucher SchemeThe new LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs depending on the class on entitlement. Any fare payment will continue to be tax free.

According to Sitharaman, savings have increased due to lockdown especially. “We would like to incentivise them to contribute to the revival of demand for the benefit of the less

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