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Finance minister Nirmala Sitharaman on Monday announced measures that could generate an additional 36,000 crore in consumer demand and drive sales of products such as mobile phones, household appliances, furniture and apparel.

The LTC cash voucher scheme and the special festival advance scheme for all central government employees, will encourage them to spend on high-value items, stoking demand for such products.

The LTC (leave travel concession) cash voucher scheme allows government employees, who haven’t availed it, to get fare as cash vouchers to be spent by March. However, they have to spend three times the ticket fare on items that attract 12% GST and above. For this, only digital transactions are allowed, and GST invoice needs to be produced.

An interest-free advance of 10,000 per employee in the form of prepaid RuPay card has also been announced to generate a demand infusion of 4,000 crore if all central government employees utilize it and an additional 4,000 crore if states match the offer and 50% of state government staff use it.

“These schemes are expected to drive demand. It will have an impact on businesses, which are desperately waiting for consumer demand to pick up," said Sitharaman.

Kumar Rajagopalan, chief executive of Retailers Association of India, said the stimulus will boost sales in the festive season. “The retail industry has pinned its hopes on festive shopping to recover from the immense loss of business caused due to the pandemic. The LTC cash voucher scheme will encourage spending on categories that attract a GST of 12% or more such as apparel, computers, consumer durables, smartphones, home appliances, furniture and home furnishings, beauty and personal care. The special festival advance scheme will boost festive spending. We hope LTC scheme can be introduced for the private sector staff as well to bring about an overall festive cheer and add further impetus to economic recovery," he said.

The Confederation of All India Traders (CAIT), too, said the move will enhance the purchasing power of government employees and contribute significantly to the rotation of money in cash-starved areas.

Since the festival advance, as well as LTC money, can be used only via digital payments, Ankur Bisen, senior vice-president, Technopak Advisors, said this measure is also directed at making e-commerce firms the natural destination for government employees.

“Many of these families are from urban India, can access the Internet, have smart devices and will make retail purchases for which there may have been pent-up demand. Since eating out and travelling is restricted, the government has deflected this into shopping, which will also stimulate demand," Bisen said, adding that e-commerce has exploded with many first-time shoppers during covid.

However, a note by Care Ratings pointed out that the increase in consumer expenditure will depend on how many employees utilize the scheme, given that several conditions are attached.

Prashant Singh, vice-president and business head–compliance and payroll outsourcing, TeamLease Services, said although staff can now use the funds which would have gone unutilized otherwise, on the flip side, allowing cash vouchers to be spent only on items with GST slab rate of 12% and above is not very feasible for middle-income families. Further clarity on the terms of execution and implementation is also required, he said.

The Care Ratings note, however, added, “If the tendency was to save more during the pandemic, the thrift motive would continue to dominate in some sections." That’s not all. There is no fresh outlay from the point of view of the government as staff get to use entitlements in advance. This is not like a cash transfer to the employees outside the salary, which is being paid, it said.

Suneera Tandon, Nandita Mathur, Saumya Tewari contributed to this story.

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