Govt gives employees cash to stimulate economy

Finance Minister Nirmala Sitharaman making the announcement

Government of India today said it will give around Rs 7,575 cr to employees of the central government and public sector units to spend on buying durables and other goods from the market, in lieu of their travel reimbursements.

Central government employees were in line to get around Rs 5,675 and public sector employees another Rs 1,900 cr by March next year as part of their four-year leave travel concession or LTC allowance.

Under the scheme, any central government or public sector employee is eligible to get a certain lumpsum amount every four years for long-distance travel, such as to a foreign country or within India.

But, said Finance Minister Nirmala Sitharaman, such travel is not possible in the current circumstances, and employees who have not already claimed the allowance for 2018-2021 period were at the risk of losing this amount.

The new scheme will allow them to claim this amount, while also helping boost consumer demand, Sitharaman said.

The central government has also urged state governments to extend such a scheme to their employees.

Under the scheme, the employee has to buy any item or items worth three times the value of their LTC allowance before March end. Moreover, the items cannot be part of the essential items list — like food or petrol — but must be in the 12%-or-above GST category.

GST of 12% or above is usually levied on items such as consumer durables, watches, eye-wear, bags and so on.

The payment has to be made electronically, such as via UPI, cards or wallets.

To be noted is that employees will get LTC equal to only one third of the price of the items that they buy. In other words, to get Rs 100 worth of LTC, they have to produce GST bills of goods worth at least Rs 300. However, if an employee has a GTC allowance of Rs 1 lakh, he can claim the entire Rs 1 lakh by spending Rs 3 lakh on buying such items.

Because of the way the scheme has been designed, government and PSU employees will together spend around Rs 19,000 cr by March 31 to claim their LTC, according to finance ministry estimates.

If state governments also implement a similar scheme, it will lead to disbursement of another Rs 3,000 cr, or purchase of goods worth Rs 9,000 cr, Sitharaman said.

The scheme was announced as part of new plans to stimulate the economy.

The scheme is also part of the response by the government to calls to put money in the hands of the people so that they can spend it and help struggling businesses get back on their feet.

However, most of those who were asking for such a scheme were hoping that the government would put money into the hands of ordinary citizens and ask them to spend it, and not necessarily into the hands of government employees.

Many ordinary citizens have lost their jobs or seen a sharp decline in their income levels, while government employees have not seen any decline in their salaries or incomes due to the pandemic.


The government also announced that it would give Rs 10,000 rupees as afestival advance in the form of a prepaid card that can be used to buy anything from any shop or establishment that supports card payment.

The money will be recovered from the employee’s salary over the next ten months.

The card validity will expire on March 31, which means that the employee must spend the Rs 10,000 before that date.

The scheme is applicable to all central government employees of all ranks.