ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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An Inconsequential Stimulus

The fiscal stimulus is too little to have any major impact on the economy.

The latest set of announcements made by the central government, which is also touted as a fiscal stimulus, includes measures to revive consumer demand and infuse more capital spending in the economy. The measures to stimulate demand, before the festival season began, included the leave travel concession (LTC) cash voucher scheme and a special festival advance scheme, with strict conditions attached and the annual bonus for the 30.6 lakh central government and public sector for employees, apart from a modest hike in the capital expenditure and trivial interest-free loans to states for funding projects.

The measures to boost consumption spending have been designed such that the additional cost to the exchequer is minimal, and are aimed to nudge central government employees to spend more. While the LTC voucher scheme and the festival advances come with strings attached, the bonus payment is without any such conditions. However, it is too small in size to have a significant impact on demand. The delayed announcement, however, has allayed fears of employees regarding the disbursal of bonus payments, after the government froze dearness allowance rates till June next year.

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Updated On : 24th Dec, 2020

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