Within a week of a pro-people budget, the government has more to offer — 6 per cent increase in dearness allowance to Central government employees and interest subsidy on loans to the farmers.
This is likely to come up before the Cabinet on Friday.
The move means that dearness allowance in the salary package of thousands of Central government employees would increase from 41 per cent to 47 per cent.
Just last September, the government had increased dearness allowance from 35 per cent to 41 per cent.
For the government, the 6 per cent hike would mean an additional burden of over Rs 1,500 crore on the exchequer. The allowance would be applicable from January 1, 2008, and would benefit over one crore Central government employees.
The Cabinet will also consider the proposal to give interest subsidy of 2 per cent on short-term crop loans to farmers.
This would mean that short-term farm loans of maximum limit of Rs 3 lakh would be disbursed at an interest of not more than 7 per cent per annum.
Finance Minister P Chidambaram has kept Rs 1,600 crore to meet the interest subsidy component through Public Sector Undertaking Banks, Cooperative Banks, Regional Rural Banks and NABARD.
The interest subsidy component is part of the government's agriculture-friendly schemes.
Chidambaram had also announced Rs 60,000 crore farm loan waiver and one-term settlement scheme in the budget.