Union FM Announces ₹12,000 Crore Interest-free 50-year Loans to States for Capital Expenditure

New Delhi: In bold Initiatives, Finance Minister Nirmala Sitharaman today announced steps to stimulate consumer demand including advance payment of a part of the wages of central government employees for spending during the festival season. 

The government has also decided to issue a special interest-free 50-year loan to states for Rs 12,000 crore capital expenditure. The eight North East states will get loans worth Rs 200 crore each, Uttarakhand and Himachal Pradesh will get Rs 450 crore each and the remaining Rs 7,500 crore will go to the rest of the states as per the 15th Finance Commission. Half of the sum will be will be given initially while the remaining upon utilization of first 50%.

Sitharaman introduced a proposal related to boost consumer spending. The plan is divided in two components: Leave Travel Concession (LTC) voucher and special festival advance scheme.

Sitharaman said the new part of this scheme is that the employees can now encash their LTCs in the form of vouchers.

“Since the employees are not able to travel anywhere due to Covid-19, they can spend the money in buying something of their choice. But the money has to be spent on items which attract 12% or more GST,” said the finance minister.
“The spend should only be done through digital mode. And GST invoice will be required, so that the amount spent can be reimbursed to the employees,” she added.

Sitharaman said that the scheme is valid till March 31, 2021. She said that the government will incur Rs 5,675 crore on this. The finance minister added that employees of Public Sector Undertakings (PSUs) and public sector banks (PSBs) can also avail the scheme.

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.

COVID-19 pandemic has adversely affected the economy. The needs of the poor and the weaker sections have been addressed in the Atma Nirbhar Bharat package. Supply constraints have somewhat eased but consumer demand still needs to be given a boost