Govt announces pre-Diwali freebies

The Government increased dearness allowance (DA) for state employees and dearness relief (DR) for pensioners by 5% with effect from July 1. This will put additional purchasing power in the hands of civil servants to the tune of Rs29.03bn, up to the end of February, after which another installment of DA would kick in.

The Union Cabinet’s decision to increase DA to 27% is in accordance with the accepted formula under the Sixth Pay Commission recommendations. The hike in DA will give more spending power in the hands of over eight million central government employees and pensioners. The additional DA will also help them weather the impact of rising prices. Consumer price inflation is currently in double digits.

The Cabinet also cleared 1% interest subvention for home loans up to Rs 10 lakh. "The 1% subvention would be for the first 12 EMIs (equated monthly installments) on the loans," Information & Broadcasting Minister Ambika Soni told reporters after a Cabinet meeting. The Government said interest rate subsidy scheme was in line with the announcement by Finance Minister Pranab Mukherjee during a debate on the budget for 2009-10 in July. The first 12 installments all loans sanctioned and disbursed during the 12 months from the date of publication of the scheme will be eligible for interest subvention. The scheme will be implemented through scheduled commercial banks and housing finance companies registered with the National Housing Bank.

The Centre also slashed the interest subsidy given to farmers on crop loans by one percentage point to 2% for this fiscal, a move that is expected to bring down burden on the central exchequer by Rs 311 crore. Farmers who have been paying back their credit promptly would continue to get 3% subvention and loans at interest rate of 6%. The Government also revised upwards the target for loan disbursements to the agriculture sector to Rs3.25 trillion for the current fiscal from Rs2.8 trillion a year ago, of which Rs2 trillion is estimated for the loans on crop.