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Home / Business News / Govt staff get bonus worth ₹3,700 crore to boost spending during festive season

Govt staff get bonus worth ₹3,700 crore to boost spending during festive season

The move will benefit more than 3 million non-gazetted employees, including those in autonomous central organizations, Union minister Prakash Javadekar said after a cabinet meeting.

business Updated: Oct 22, 2020, 06:24 IST
Prashant K. Nanda
Prashant K. Nanda
Hindustan Times, New Delhi
Union Minister Prakash Javadekar.
Union Minister Prakash Javadekar.(Sanjeev Verma/HT PHOTO)

The Union cabinet on Wednesday approved a plan to disburse more than Rs. 3,737 crore to central government employees before Dussehra to boost spending in the festive season.

The move will benefit more than 3 million non-gazetted employees, including those in autonomous central organizations, Union minister Prakash Javadekar said after a cabinet meeting.

“This will boost demand in the market. We are ready to disburse ₹3,737 crore immediately, before Dussehra (25 October),” Javadekar said.

The Union government has been nudging staffers, who have been relatively unaffected by job losses and salary cuts because of the coronavirus pandemic, to spend as it seeks to spur demand in the economy.

Of the total beneficiaries, almost 1.7 million non-gazetted employees of commercial establishments, including those at “railways, post, defence, Employees Provident Fund Organization (EPFO), Employees State Insurance Corp., etc. will be benefitted, and the financial implication would be Rs.2,791 crore”.

Besides, an ad-hoc bonus will be given to 1.37 million non-gazetted central government employees, which will cost the exchequer Rs.946 crore, the union minister said. The move will also help address concerns of government employees who were worried that the government might do away with the bonus payment this year after it froze dearness allowance rates till July.

Wednesday’s decision comes just days after finance minister Nirmala Sitharaman announced measures worth ₹46,675 crore, including interest-free festival loans for government employees to stimulate consumer spending.

“Through such announcements, the government is trying to perk up demand in the market. While the previous measures to nudge central government employees to spend more on consumer durables by utilizing LTC and interest-free loans came with strings attached, this bonus decision seems to be without any conditions, but it’s too small in size to affect demand significantly,” said Sunil Sinha, principal economist of India Ratings and Research, a part of the Fitch Group.

“While the measures announced in the previous months did help the supply side to some extent, the demand side measures announced in the last two weeks is small. But, if you ask if the government is serious about reviving demand, then the answer is yes, but they don’t have enough fiscal space. If you wish to increase spending, you have to put money in the hands of those who don’t have an assured income. People with assured income may actually save due to risk aversion in the current economic uncertainty,” Sinha added.

India’s GDP contracted 23.9% in the June quarter, making it the worst performer among G20 economies and the Reserve Bank of India has forecast that India’s economy will contract 9.5% in FY21.

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