Union Finance Minister Nirmala Sitharaman held a press conference on economic issues on Monday, 12 October, announcing that the government would give Rs 12,000 crore in special interest-free 50-year loans to states for capital projects as part of the plan to boost economic activities.
Sitharaman said that an estimate based on measures announced on Monday showed that it will boost demand by Rs 73,000 crores, to be spent by 31 March 2021.
The plan for the 50-year loans involves Rs 2,500 crore for the Northeast, Rs 7,500 crore for other states, in proportion to share in Finance Commission devolution and Rs 2,000 crore for states which meet at least three out of four reforms given in Atmanirbhar fiscal deficit package.
Addressing the media, Sitharaman admitted that there is no doubt that the pandemic has affected the economy adversely, adding that the needs of the poor and weaker section have been addressed in the Atmanirbhar Bharat package and its extensions. However, she added that while supply constraints have eased, consumer demand is still affected.
The FM said that the proposals presented on Monday are designed to stimulate demand by front-loading or advancing some of the expenditure with some offsetting changes, while others are directly linked to an increase in the GDP.
She also said that government employees needed to be incentivised to spend to revive the demand in the economy.
One of the proposals for this is the LTC Cash Voucher Scheme, under which government employees can opt to receive cash amounting to leave encashment plus three times ticket fare, to buy items which attract GST of 12 percent or more.
Only digital transactions will be allowed and the money needs to be spent by 31 March 2021, Sitharaman said.
Meanwhile, the government will also give Rs 10,000 worth of special festival advance to all its employees as part of its measures to stimulate demand in the economy.
The FM also announced that the Centre would provide Rs 25,000 crore in addition to Rs 4.13 lakh crore budgeted for spending on roads, defence infrastructure, water supply, urban development, domestically-produced capital equipment
GST Meet to be Held on Monday
Meanwhile, the GST Council, comprising all state finance ministers, is meeting on Monday to come to a consensus on the issue of GST compensation cess. This will be the third time that the council headed by Sitharaman is meeting to discuss the issue of funding the shortfall of Goods and Services Tax (GST) revenue of states.
The issue still remains unresolved with around 10 Opposition-ruled states and Union territories disagreeing with the Centre’s borrowing proposals.
The finance minister is expected to hold a briefing at 7 pm on Monday to address this.
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