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Stimulus 2.0 to push fiscal deficit to 9.5 per cent of GDP: SBI report

The new schemes which will put an additional burden of Rs 40,000 crore on the government form 0.21 per cent of the GDP

Topics
Fiscal Deficit | Nirmala Sitharaman | Economic stimulus

BS Web Team  |  New Delhi 

Union Finance Minister Nirmala Sitharaman addresses a press conference, in New Delhi, Monday, Oct. 12, 2020.
Union Finance Minister Nirmala Sitharaman addresses a press conference, in New Delhi.

A day after Finance Minister announced schemes to boost consumer spending hit by the coronavirus lockdown, the State Bank of India's Ecowrap pointed that the announcement is set to push the to 9.5 per cent of the

The new schemes which will put an additional burden of Rs 40,000 crore on the governmen.

Sitharaman announced the Cash Voucher and Festival Advance Schemes to encourage government employees to spend more and boost demand in the economy.

The report authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India says that the scheme, announced by Sitharaman, "is unlikely to work unless the government decides to pay GST component also over and above the fare entitlement amount as is done by many PSBs."

ALSO READ: LTC scheme: Consumer electronic players eye boost in festive demand

As part of the announcement, central government employees who get Leave Travel Concession (LTC) for their travels will get an equivalent of the amount even without travelling. They could use the allowance to make purchases of their choice. This will apply to the purchase of goods that attract 12 per cent GST or more and can be spent on buying goods worth three times the fare and equal to the cash encashment. The spending will have to be done by digital mode only.

There are around 3.5 million central government employees who would be entitled to this benefit.

The SBI in its Ecowrap said, "Since covers not just the employee but the dependent family members, the drawdown on the personal income will be huge. For instance for employees eligible for business travel get a two-way fair value of Rs 36000. For a family of four, this works out to Rs 1,44,000. The total expenditure works out to Rs 4,32,000 plus the GST amount of Rs 1,03,680."


ALSO READ: Cash vouchers, Rs 10k festival advance: Key announcements by FM Sitharaman

The report highlighted that out of the two schemes, it is only in the case of the festival advance proposal that one can think there is some additional income over and above the current income. "This is where one can expect demand will get a boost by way of discretionary consumption," it added.

Reflecting on the financial assistance announced for states, the report remarked that Rs 40,000 crore is the maximum additional cash outgo of the Centre during the current fiscal, which is around 0.21 per cent of The last stimulus package had a cash outgo of Rs 2 trillion or around 1 per cent of

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First Published: Tue, October 13 2020. 13:24 IST
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