India's finance minister Nirmala Sitharaman announces new stimulus measures, in New Delhi, India, October 5 2020. Picture: T NARAYAN/BLOOMBERG
India's finance minister Nirmala Sitharaman announces new stimulus measures, in New Delhi, India, October 5 2020. Picture: T NARAYAN/BLOOMBERG

New Delhi — India on Monday announced steps to stimulate consumer demand, including advance payment of a part of the wages of federal government employees during the festival season and more capital spending as it tries to bolster the pandemic-hit economy.

The government will allow its employees to spend tax-exempt travel allowances on goods and services, finance minister Nirmala Sitharaman said.

She said the government will also shore up investment by spending extra 250-billion rupees ($3.41bn) on roads, ports and defence projects, and offering 120-billion rupees in interest-free 50-year loans to state governments for spending on infrastructure before March 31 2021.

“All these measures are likely to create an additional demand of 730-billion rupees ($9.96bn)," Sitharaman said, adding the proposals would stimulate demand in a “fiscally prudent way”.

Prime Minister Narendra Modi's government, which imposed a tough lockdown to stem the spread of the coronavirus in March, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season, which runs from October to March.

The latest package would not require any extra borrowing by the federal government, Tarun Bajaj, economic affairs secretary at the finance ministry, told reporters. India's federal government said in September it would stick to a revised borrowing target of 12-trillion rupees ($163.78bn) in the current fiscal year ending March.

India's total coronavirus cases have crossed 7.12-million, second only to the US, with deaths reaching 109,150.

The Reserve Bank of India left key policy rates unchanged on Friday, while retaining an accommodative monetary stance to support an economy that is projected to contract by almost 10% in the current fiscal year.

Reuters

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.