The fresh stimulus package announced by Finance Minister Nirmala Sitharaman to boost domestic demand will give a much-needed push to economic activity, Niti Aayog Vice-Chairman Rajiv Kumar said on Monday. Sitharaman announced a Rs 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of LTC, to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic.
"As she had assured us, honorable FM Nirmala Sitharaman has announced a fresh stimulus package to boost domestic demand and thereby giving the needed push to economic activity. The timing of the stimulus is perfect coming just ahead of the festival season when the green shoots of recovery are becoming stronger," Kumar said in a tweet.
The multiplier effects of the package are expected to be multiples of the original amount, and higher economic activity would be sustained in the coming period, Kumar said. As much as Rs 11,575 crore would be paid as LTC allowance and advance to central government and PSU employees on the condition that they spend on non-essential goods before March 31, she said.
States would separately be eligible to get Rs 12,000 crore in 50-year interest-free loans for capital expenditure, while the Union government will spend an additional Rs 2,500 crore toward capital expenditure on roads, defence infrastructure, water supply and urban development. The government, which had in May announced a Rs 20 lakh crore 'Aatmanirbhar Bharat' stimulus package, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season.
A tough lockdown imposed to stem the spread of coronavirus had resulted in the GDP contracting by a record 23.9 per cent during April-June. Analysts have predicted that the economy may be headed for its worst contraction this fiscal.