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Stimulus package size questioned

On Monday, the government  had announced measures to boost demand by allowing central government employees to dip into their leave travel concession
Further, the employees will be given a pre-paid Rupay card of Rs 10,000 under a special festival advance scheme. Finance minister Nirmala Sitharaman had put the size of the stimulus at Rs 73,000 crore.

Our Special Correspondent   |   Mumbai   |   Published 14.10.20, 01:20 AM

The actual size of the government’s stimulus package could work out to a modest Rs 40,000 crore and not Rs 73,000 crore, a report from the economic research wing of the State Bank of India (SBI) has said.

On Monday, the government  had announced measures to boost demand by allowing central government employees to dip into their leave travel concession (LTC). The LTC amount can be tax free provided the employee spends three times the sum on goods and services which carry GST of 12 per cent or more.

Further, the employees will be given a pre-paid Rupay card of Rs 10,000 under a special festival advance scheme. Finance minister Nirmala Sitharaman had put the size of the stimulus at Rs 73,000 crore.

While the announcement did not excite the markets, a report from the economic research wing of the SBI said the estimate was overblown and the actual sum  was only Rs 40,000 crore, or 0.21 per cent of  GDP.

The LTC Voucher carrot, the report says, will not work because only 10-15 per cent of the employees will avail themselves of the scheme.

The obligation on the employee to spend three times the value of the entitled fare in order to claim the tax break puts a disagreeable choice before the employee, the report said.

Around 3.5 million central government employees would be entitled to this benefit, the report said. “It is doubtful how many will avail this scheme. If the person has to pay GST then it will be a burden and in fact he would be better off paying taxes on the amount availed by him,’’ the report said.

The report also questioned the interest-free loan scheme to states.

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