NEW DELHI • India yesterday 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 its pandemic-hit economy.
The government will allow its employees to spend tax-exempt travel allowances on goods and services, India's Finance Minister Nirmala Sitharaman told a news briefing.
She said the government will also shore up investment by spending an extra 250 billion rupees (S$4.6 billion) on roads, ports and defence projects, and offering 120 billion rupees in interest-free 50-year loans to state governments to spend on infrastructure before next March 31.
"All these measures are likely to create an additional demand of 730 billion rupees," Ms Sitharaman said, adding that the proposals would stimulate demand in a "fiscally prudent way".
Prime Minister Narendra Modi's government, which imposed a tough lockdown in March to stem the spread of the coronavirus, is pushing ahead with a full opening to try to boost the economy ahead of the usually high-spending festival season, which runs from this month to March.
The latest package would not require any extra borrowing by the federal government, said Mr Tarun Bajaj, economic affairs secretary at the Ministry of Finance.
India's federal government said last month that it would stick to a revised borrowing target of 12 trillion rupees in the current fiscal year ending March, against an earlier estimate of 7.8 trillion rupee.
The total number of coronavirus cases in India has crossed 7.15 million, second only to the United States, with the death toll reaching 109,500.
The Reserve Bank of India left key policy rates unchanged last Friday, while retaining an accommodative monetary stance to support an economy that is projected to contract by almost 10 per cent in the current fiscal year.