Ministry Of Finance Announces Scheme To Stimulate Spendings Amongst Central Government Employees

Nirmala Sitharaman Launches New Schemes To Revive Economy


  • Ministry of Finance announces measures to boost the Indian economy which has taken a nosedive
  • Central Government employees to get Rs 10,000 advance
  • The Central Government employees will also get LTC Cash Couchers
  • Ministry of Finance believes this would help stimulate spending

On Monday, the Finance Minister on India, Nirmala Sitharaman announced two schemes which are aimed at incentivising the consumer spending and boost the country’s GDP as part of the Centre’s fresh economic revival push.

FM Sitharaman had also announced another measure which will offer boost capital expenditure of the states.

As part of the attempt of increasing the consumer spending, Sitharaman announced two schemes – LTC Cash Voucher Scheme and Special Festival Advance Scheme – which will primarily benefit the Central Government employees.

Sitharaman said, “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,”.

LTC Cash Voucher scheme

The LTC (Leave Travel Concession) Cash Coucher scheme will offer the government employees to opt to receive cash amount to leave encashment plus three times the ticket fare, to buy items which attract a GST of 12% or more.

Sitharaman went on to say that only the digital form of transactions will be allowed and a GST invoice will have to be produced to get the benefit from this scheme.

To put things into perspective, any central government employee who will be eligible to claim LTC will be able to avail leave encashment benefit in place of the travel expenses. The money can thereafter be used by them towards discretionary spending.

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Union Finance Minister Nirmala Sitharaman said, “If Central government employees opt for it, this will cost around Rs 5,675 crore. The employees of PSBs and PSUs allowed to avail this facility, and for PSBs and PSUs the cost will be Rs 1,900 crores. The demand infusion in the economy by central govt and PSUs will be approx Rs 19,000 crore,”.

Sitharaman added, “Even if 50 per cent of the States opt to give this facility, we think that this will bring in Rs 9,000 crores,”. The total benefit under the LTC Voucher scheme is estimated to cost the government roughly Rs 28,000 crore. Another boost worth Rs 28,000 crore can be gained if the private sector chips in.

LTC Cash Voucher scheme from Ministr of Finance

Special Festival Advance scheme

Finance Minister Sitharaman also announced a Special Festival Advance scheme which would help boost the spending of the central government employees amidst the ailing economy as a one-time measure.

The Festival advance along with similar advances were abolished on the recommendation of the 7th pay commission. But to increase the consumer demand in an economy hit by coronavirus pandemic, the government decided to restore it as a one-time measure.

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“It is recommended to restore festival advance to govt employees for festivals up to 31st January, 2021,” the central government said.

Let us take a look at the 5 things to know about the festival advance scheme:

  1. Interest free advance of Rs 10,000 to be recoverable in maximum 10 instalments
  • This Rs 10,000 advance will come as a pre-paid RuPay card, which will be available to be availed and spent by the 31st of March, 2021.
  • The Central Government expects to disburse Rs 4,000 crore under this advance scheme
  • If given by the state governments, another Rs 8,000 crore is likely to be disbursed. Assuming 50% adoption by states the estimate is Rs 4,000 crore.
  •  Additional consumer demand generated will be Rs 8,000 crore.
LTC Cash Voucher scheme from Ministr of Finance

“Special Festival Advance Scheme for non-gazetted employees is being revived as a one-time measure, for gazetted employees too. All central govt. employees can now get an interest-free advance of Rs 10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021,” Union Finance Minister Sitharaman said.

Sitharaman also added that one-time disbursement of this Special Festival Advance scheme is expected to amount to Rs 4,000 crore. “If given by all state governments, another Rs. 8,000 crores is expected to be disbursed. Employees can spend this on any festival,” she said.

Capital Expenditure boost to states

As part of an attempt to boost the capital expenditure, Union Finance Minister Nirmala Sithraman said that the Centre has decided to offer interest-free 50-year loans to states to the tune of Rs 12,000 crore. These loans will consist of three components.

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The first part will be Rs 2,500 crore for North East (Rs 1,600 crore), and Rs 9,000 crore for Uttarakhand and Himachal Pradesh. The second part will involve Rs 7,500 crore for other states in proportion to share in Finance Commission devolution.

At least 50% of the loan will be granted initially and the balance will be allotted after use of the first50% by the states.

It may be noted that if there are any unutilised funds they may be re-allocated.

The last part of the capital expenditure boost is Rs 2,000 crore for the states which will be able to meet at least three out of four reforms mentioned under the Aatmanirbhar fiscal deficit package.

Finance Minister Sitharaman added that an additional budget of Rs 25,000 crore will be offered for the capital expenditure on constructions of roads, defence infrastructure, water supply, urban development and domestically produced capital equipment.

During the conference, Nirmala Sitharaman said that these fresh proposals are designed in a way to stimulate demand by “front-loading/advancing some of the expenditure with some offsetting changes” and added that “We estimate that the measures announced today, for boosting consumer spending and capital expenditure, will boost demand by Rs 73,000 crores, to be spent by March 31, 2021,”.


Ajay Kumar

Ajay joined our team as a content writer after earning his master's degree. He has been writing for since his graduation as a freelancer and raises voice for the people in need with his work. He likes to work on data-driven news reports. When he is not writing, he spends his time with his family.

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