Finance Minister Nirmala Sitharaman is addressing the media on the economic issues facing the country. Her press conference comes at a time when the country’s GDP or gross domestic product contracted a record 23.9 per cent in the April-June period as the quarter fully captured the damage caused by the coronavirus pandemic-related restrictions, and is expected to shrink an overall 9.5 per cent in the current financial year by the Reserve Bank of India. Economists and analysts await any positive signs in the economy to assess the path of economic revival ahead. The government is currently in the process of gradually lifting restrictions imposed in late-March to curb the spread of the deadly coronavirus, which has sent an already slowing economy marred by low demand into a standstill. The Finance Minister’s press conference comes ahead of a meeting of the GST or Goods and Services Tax Council due later in the day.
Here’s are highlights of Finance Minister Nirmala Sitharaman’s press conference on economic conditions:
- Supply constraints eased, but consumer demand still affected
- COVID-19 has adversely affected economy, needs of poor and weak sections of society have been addressed in government’s Atma Nirbhar Bharat package
- Proposals presented today designed to stimulate demand in a fiscally prudent way
- Some proposals for advancing/front-loading of expenditure
- Others directly linked to increase in GDP
- Today we have some proposals to stimulate demand in economy
- Broadly classified into two categories: consumer spending and capital expenditure
- Finance Minister announces LTC Cash Voucher scheme
- Government employees, many organised sector employees, have escaped economic effects of COVID-19
- Their salaries have been protected and savings increased
- They need to be incentivised to contribute to demand revival for benefit of less fortunate
- Central government staff gets LTC in block of 4 years (one to travel anywhere within country, three to visit hometown)
- Air/rail fare is reimbursed
- In addition, leave encashment of 10 days is paid
- Due to pandemic, employees not in position to avail of LTC in 2018-21 block
- Cost estimated at Rs 5,675 crore if central government employees opt for scheme
- Rs 1,900 crore if public sector bank/public sector undertaking employees opt for it
- Government to allow tax concession for state government/private sector (for employees currently entitled to LTC, subject to conditions)
- Demand infusion in economy by central government/PSU staff estimated at Rs 19,000 crore
- Demand infusion by state government employees estimated at Rs 9,000 crore
- Additional consumer demand generated estimated at Rs 28,000 crore
- Special Festival Advance scheme to be restored (abolished on recommendation of 7th Pay Commission) for festivals till March 31, 2021
- Interest fee advance of Rs 10,000 recoverable in a maximum of 10 instalments
- If given by state governments, Rs 4,000 crore expected to be disbursed
- If given by all state governments, another Rs 8,000 crore likely to be disbursed
- Employees to get pre-loaded RuPay card, government to bear bank charges
- Capital expenditure to give special assistance to states
- Special, interest free, 50-year loans to states for Rs 12,000 crore capital expenditure
- Part 1: Rs 2,500 crore for North East
- Part 2: Rs 7,500 crore for other states, in proportion to share in Finance Commission devolution (50% initially, balance after use of first instalment)
- Part 3: Rs 2,000 crore for states which meet at least 3 out of 4 reforms given in Atma Nirbhar fiscal deficit package
- Capital expenditure to be used for new/ongoing capital projects, settling contractors’/suppliers’ bills by March 31
- Funding to be over and above other additional borrowing ceilings given to states
- Bullet repayment after 50 years, no servicing required till then
- Capital expenditure has a high multiplier effect
- It will boost GDP, now as well as in future
- New thrust to capex of states and centre
COVID-19 has adversely affected economy, needs of poor and weak sections of society have been addressed in government’s Atma Nirbhar Bharat package
Today we have some proposals to stimulate demand in economy
Broadly classified into two categories: consumer spending and capital expenditure.
Later in the day, Finance Minister Nirmala Sitharaman will chair a meeting of the GST Council. In the GST Council meeting, due at 4 pm, will discuss the issue of funding the shortfall in Goods and Services Tax (GST) revenue to states.
Domestic stock markets gave up most of initial gains ahead of Finance Minister Nirmala Sitharaman’s virtual address to the media on economic issues. At 12:32 pm, the Sensex index traded 120.77 points – or 0.30 per cent – higher at 40,630.26, while the broader Nifty benchmark was up 13.20 points – or 0.11 per cent – at 11,927.40.
Economy To Contract 9.5% In 2020-21: RBI
Her press conference comes at a time when the country’s GDP or gross domestic product contracted a record 23.9 per cent in the April-June period as the quarter fully captured the damage caused by the coronavirus pandemic-related restrictions, and is expected to shrink an overall 9.5 per cent in the current financial year by the Reserve Bank of India.
Finance Minister Nirmala Sitharaman will shortly address a press conference on the economic issues facing the country.