Context: Union Finance Minister recently announced two sets of measures to generate consumption demand and boost capital spending in the economy.

Key measures

• Leave Travel Concession (LTC) Cash Voucher Scheme: The Government has decided to give cash payment to employees in lieu of one LTC during 2018-21. Full payment on Leave encashment and tax-free payment of LTC fare depending on class of entitlement will be given.

Special Festival Advance Scheme

• It was meant for non-gazetted government employees. It is being revived as a one-time measure for gazetted employees too. 
• All central govt. employees can now get interest-free advance of Rs. 10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021.

Capital Expenditure Boost for States: A special interest-free 50-year loan to states is being issued. For Rs 12,000 crore capital expenditure which is to be spent by March 31, 2021: 

• (1)Rs 200 crore each for 8 North East states; (2) Rs 450 crore each for Uttarakhand, Himachal Pradesh; (3) Rs 7,500 crore for remaining states, as per share of Finance Commission’s devolution.

Purpose of this move

• Supply constraints in the economy have eased over recent months, but consumer demand remained affected and these measures aim at advancing consumer spending and Capex.
• Capex steps are “directly linked to an increase in economic output given their high multiplier effect”.
• The earlier announced Atmanirbhar Bharat package addressed the requirement of essential goods for needy sections of the society and now these measures aim at promoting consumption of high-value items by those employees whose salaries and jobs have not been affected by Covid-19 pandemic.
• With the participation of the private sector, these will stimulate growth in the economy by advancing the consumption of non-essential, relatively high-value goods and services in the economy.