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Union minister Prakash Javadekar
Union minister Prakash Javadekar

Cabinet approves 3700 crore bonus for government staff

The move will benefit over 3 million non-gazetted employees including those in autonomous central organization, Union minister Prakash Javadekar said after a cabinet meeting chaired by Prime Minister Narendra Modi

NEW DELHI : New Delhi: Continuing its effort to spur demand, the union cabinet Wednesday approved to disburse over Rs. 3700 crore to central government employees before Dussehra to aid spending in the market during the festive season.

The move will benefit over 3 million non-gazetted employees including those in autonomous central organization, Union minister Prakash Javadekar said after a cabinet meeting chaired by Prime Minister Narendra Modi, and promised that this will be disbursed before the weekend.

“This will boost demand in the market. We are ready to disburse 3,737 crore immediately, before Dussehra (on the weekend)," Javadekar said.

The Union government is looking to increasing demand in the market and has been nudging government staffers, who have been left unscathed from job loss due to the pandemic to spend.

Of the total beneficiaries, almost 1.7 million non-gazetted employees of commercial establishments “like Railways, Post, Defence, employees provident fund organization (EPFO), employees state insurance corporation etc will be benefitted and the financial implication would be Rs.2791 crore".

Besides, an ad-hoc bonus will be given to 1.37 million non-gazetted central government employees, which will cost the exchequer Rs.946 crore, the union minister said. The move will also help address concern of government staffs who were doubting that like dearness allowance freeze, the government might do away with the bonus payment as well in 2020.

The Wednesday's decision comes nine days after Finance Minister Nirmala Sitharaman announced measures worth 46,675 crore including interest free festival loans for government employees to stimulate consumer spending in the midst of covid-induced economic slowdown.

“Through such announcements, government is trying to signal that it is trying to perk up demand in the market. While the previous measures to nudging central government employees to spend more on consumer durables by utilizing LTC and interest free loans came with strings attached, this bonus decision seems be without any strings but it’s small in size to move the demand market," said Sunil Sinha, the Principal Economist of India Ratings and Research, part of the Fitch Group.

“While the measures announced in previous months did help the supply side to some extent, the demand side measures announced in last two weeks is small and will have to be substantial to get desired impact. But, if you ask if the government is serious to revive demand then the answer is yes but they don’t have enough fiscal space. So targeting government employees means not increasing its debt burden. If you wish to increase spending you have to put money in the hands of those who don’t have an assured income. People with assured income (like govt staff) may actually save due to risk aversion in the current economic uncertainty," Sinha added.

India’s GDP contracted 23.9% in the June quarter, making it the worst performer among G20 economies and the Reserve Bank of India has already said that India’s economy will contract 9.5% in FY21.

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