Government’s LTC cash voucher scheme: Consumer durables, retail firms to see demand boost

Consumer durables and retail players expect to witness a boost in demand in the upcoming festival season, with the government’s move to offer LTC cash voucher and festival advance schemes to Central government employees. However, the travel industry expressed disappointment with the fact that LTC funds will be redirected towards consumer goods.

Kumar Rajagopalan, CEO, Retailers Association of India, said the LTC cash voucher scheme will encourage spending on categories which attract a GST of 12 per cent or more such as apparels, laptops, consumer durables, smartphones, home appliances, beauty and personal care. Similarly, the festival special advance scheme will boost spending. “We hope LTC cash voucher scheme can be introduced for private sector employees as well to bring about an overall festive cheer and add further impetus to economic recovery,” he added.

Rajneesh Kumar, Chief Corporate Affairs Officer and SVP, Flipkart, said the announcement will help propel the latent demand in the economy. “E-commerce has been at the forefront of addressing this latent demand and the government’s decisions to give more money in the hands of consumers to spend through digital mode will give a boost to online buying, which in turn helps millions of MSMEs, artisans and sellers," Kumar said.

Signs of revival

As per what Finance Minister Nirmala Sitharaman announced, a person, having a pay of ₹1,38,500, four members in family and eligible for economy class air fare (graded fare of ₹20,000) will need to spend nearly ₹3 lakh to be eligible for an LTC benefit of ₹1.34 lakh.

Kamal Nandi, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA), said the move will provide more liquidity to customers for discretionary spends which will augur well for the consumer durables segment. “The industry is witnessing encouraging signs of revival. With this announcement adding to normal monsoon boosting agricultural output in rural markets and several firms reversing pay-cuts in urban areas, we expect the demand to propel and sustain over the next couple of months,” Nandi added.

Traditionally, Indian consumers make big-ticket purchases during the festival season. After a challenging Q1 due to the Covid-induced lockdown, consumer durables firms are betting heavily on the festival season to recoup some losses.

Manish Sharma, President and CEO, Panasonic India & South Asia, said the government’s move comes at a time when consumer sentiment and expenditure is muted. “The consumer durables industry lost close to 25 per cent of the overall business due to lockdowns in the early part of 2020 and we are hopeful of recovering a significant part of the same this festive season,” he added.

Traders will benefit

Meanwhile, the Confederation of All Indian Traders (CAIT) also said conversion of LTC benefits to allow claims for expenses made by the government employees coupled with festival advance scheme will empower them to make expenditures on forthcoming Diwali festival up to a period till March 31 and “contribute significantly to the rotation of money in cash-starved markets of the country benefiting the traders.”

Tourism sector

However, in a statement, the Federation of Associations in Indian Tourism & Hospitality said, “After almost eight months of nil to very limited tourism activity, festival season was one of the few demand drivers that the Indian tourism, travel & hospitality industry was looking forward to..Instead redirecting the LTC money of government employees to buy consumer goods would dry up those funds for the travel sector. Additionally, it would also send a vote of no confidence to the tourism travel & hospitality industry which was looking to get back on its feet after ‘Unlock’.”