 Hello, and let's talk about the supposed festival bonanza for government employees. Yesterday, newspapers were widely celebrating this so-called bonanza announced by the government for its employees. According to these papers, nearly 31 lakh non-gazeted government and public undertaking staff were to get a festival bonus that amounted to rupees 3,737 crore. Now the bulk of this amount that's 2,791 crore is for nearly 16.97 lakh employees of institutions like the railways and the postal services, while the rest will go for nearly 13.7 lakh employees of the central government. This announcement seems pretty impressive on the face of it, until you go into the fine print of course, and then you realize that there is nothing unique or special but this is something given every year. Similarly, last week, finance minister Nirmala Sitaraman made announcements regarding a leave travel cash voucher and a festival advance for central government employees. Again, there is much behind the obvious in these announcements. We talked to journalist Orindya Chakravarty to find out what is behind these announcements. Thank you Orindya for joining us. So yesterday we saw newspapers, especially the financial newspapers declared a bonanza and that was a word almost universally used among all the media organizations and we had complaints. We've talked about all this while the government refusing to spend money to stimulate demand and it's been this thing and the media seems to embrace that narrative saying how the government has done this. If you go a bit into the fine print, was this exactly such a big or significant announcement? It actually tells you about two things. One is that it's possible that our news media editors and journalists are complicit. They want to sell everything as a great big achievement of the government. It is a possibility. I'm not discounting that. We know that happens. But I think there's also basic illiteracy here. They don't even do a Google search to find out a basic thing. Is it paid every year? Even if you don't know and you're a reporter, we were trained, Prashant, to do a Google search or to look up the back issues and find out whether this is a new thing. This is paid every year. In fact, this year it is delayed. It has been delayed this year. Railway employees have been getting this performance link bonus and non PLB which is for non gazetted officers from all kinds of, they've been getting it since 1979, 1980. There is nothing new in it. In 2017, 18, 19, they were given 2044 crore just railway employees. I think they were about 11 lakh out of the 30.6 lakh that we're talking about who were given 2044 crore. Now add up all the others and I'm sure it'll come right to that same number. Maybe a little bit increased because of inflation, but otherwise it's broadly the same amount which was given last year, which is budgeted for because broadly it would be budgeted for because bonuses have to be given. They are given. It's part of the deal of the jobs that have been given to people, whether it's in coal mines, whether it is in other places, bonuses are paid. It is part of the budgeting exercise itself. At least a band would have to be cleared for those payments to take place. Which is why every year, if you do a Google search, you'll find it for every single year around this time, before the Shaira, before Diwali, before Durga Puja, bonuses are paid. The cabinet approves a certain amount. Usually it is 72 to 78 days. That is what has been done again this year. And our newspapers make that the front headline. They will not tell you Prashant and that I'm sure that you are aware of that but really the employees were threatening to go on strike. They were going to go on strike from yesterday and they've now withheld that strike. They're not going because the bonus has been announced because it was delayed. That particular news item was probably hidden in one of the inside pages of their own papers. Maybe some PTI news which was put in there to fill a small block which was an ad didn't come in or a classified didn't come in. So they look for something and put that in. So yesterday I tweeted that if only they read their own papers, they would realize that it's not new. Exactly. So that's what I'm saying. I mean, it's amazing that they should be passed off as a fiscal. Bonanza. Bonanza. Right. It's basically more or less like saying that salaries are coming around the first spot. Yeah, it's exactly. It's like saying that every time someone, if you pay the person who comes to wash the dishes in your house, their salary, they should be very grateful and say, thank you so much. You have given me such a big gift. It's like that. I mean, it's a joke. Exactly. Right. And in this context, I also want to talk about two announcements. Finance Minister Dharvanasitaraman made last week, which again were kind of quite celebrated. One was regarding a leave travel cash voucher and the other was regarding a festival advance. So could you first maybe talk about the leave, the LTA system itself? Again, I guess it's also interesting because for most people in the private sector, there's no real concept of, at least for many people, there's no concept of this thing. So it seems like something very innovative. So, you know, my parents were university teachers. So we got LTC and there was also something else called home travel allowance, where people could visit their home. It was assumed that they've come to Delhi or some city to work and you got a train fare, the entire family got back and forth. So in a four year chunk, you got to take HTA and LTA. Now, so LTA was something that you do when you took a holiday. And because of LTA, actually people have traveled, government employees have traveled across India, they've taken train trips, traveled to different parts of India, seen things across India. And this is actually one of the, I would say, one of the social initiatives of the government to encourage people to know their own country, take holidays. And now LTA can be taken, I think in four, there are four year cycle in which it is announced. So there's a 2018 to 2021 cycle right now. If you don't take it, it lapses. This is sort of clarifying by LTA, you mean that when you go and leave your tickets are paid for by the government. And that particular expenditure, because ultimately it is part of, it's something that you want, right? Yeah. That particular expenditure, you get a tax rebate on that. Now, most corporate organizations also give you an LTA. For instance, where I work, I had an LTA. If I did not take it, it came into my salary, but I had to pay full tax on it. If I could give tickets and say this is where I've traveled and say that this is the time when I took leave, I took leave and these are the tickets that I spent on, that particular amount of expenditure would become tax exempt. So that would go into the tax exempt category. So that is actually available to private employees as well. Now, the point is that the government is saying, okay, this year because of COVID, maybe people are not being able to travel and their money will lapse, right? So on the face of it, this is, and therefore instead of that, we're going to give them, let them encash it. They could take that amount which they would have spent on a ticket, they'll get that money. And also if they're taking a 15 day leave that they're now going to not go to take it. If they don't take it, they can encash that leave. A lot of private companies don't have this leave encashment system which tell you you have to take leave. A lot of private companies do have a leave encashment. Now the government also is saying, okay, you can encash that leave, take that amount and this is yours and it will also be tax free. There's still some issue about whether it can, it will be tax exempt. The interesting thing is Prashan, on the face of it, when I first saw it, I said, okay, good. The government is doing, you know, it might still be part of the budgetary process itself because ultimately governments probably, all government departments estimate how many people are likely to take and that's part of the money they want to be budgeted for there. Now, the issue is that the government is saying, no, you have to pay, spend three times that amount to get the money. So if you were traveling to, let's say Kerala from Delhi back and forth and you get, I think, AC2 tier tickets, let's say that for the family, the total return would come to, I don't know, let's say 20,000 rupees. You'd be able to tell me better about that. But 20,000 rupees, let's say you, and you encash your leave, let's say another 10,000 rupees. So 30,000 rupees is the amount that you would be available to you in LTA. I'm taking a large amount. You would have to pay, spend 90,000 rupees to take advantage of that 30,000 rupees. Why would you do it? Right. Only if you were already planning to buy a lot of things, right? Only if you're planning to buy a car or a big LCD LED TV, which costs a lot of money or the latest refrigerator, where I don't know if it was a 90,000 rupees refrigerator, but even if someone was going to spend 15,000 rupees, they would still have to pay, spend 45,000 rupees to be able to buy, take advantage of this thing. So therefore, this essentially is telling people, we are going to give one-third the amount, which was already you were going to get. You can take it in 2021 also. But here, take this one-third, spend three times. Who is it going to benefit? Prashant, that's the question I would like to ask you. Who benefits from this extra spending? So when we are looking, it would probably be, say, the very organized sector, maybe the biggest corporates because that amount of expenditure is important. Because there is also one more caveat. I mean, it's not even that you can say that, okay, I'm going to get my house painted by the local painter. No. The caveat is that everything you spend has to be spent on things which spend, which pay at least 12% GST. So 12%, 18%. Now, we know that very small entrepreneurs are exempt from GST registration, right? If they have a 40 lakh turnover in a year, they don't have to register for GST. Right. And that means that anything that you buy from the smallest of entrepreneurs cannot be done using this particular money that has been given to you. This can only be spent largely on what we call white goods or consumer durable, right? This is what you spend on. Provide the GST bill who gains from it, as you said. Big corporates. Big corporates and big service providers, they are the people who gain. They are the people who are going to benefit from a one-third stimulus being given by the government of what people were going to get in any case. Absolutely. And what about the advances? That's also a similar attempt. I mean, I have a driver who I constantly have to give advances to and usually he never pays it back. So effectively it becomes an additional bonus for it. But the advances that you pay, what is an advance? It is something that you're going to earn over the next few months, which you're taking in advance. Now, your employer is going to say, when you take it in advance, you're effectively gaining because there's an interest loss that I have. If I had put that money in a bank, in a savings account, I would have got three, three and a half percent interest. And that to you in advance, for one year or let's say six months, I'm losing interest for six months. What is the government losing by giving 10,000 rupees advance or maximum 10,000 rupees advance? It is in an annual cycle. It is losing three, three and a half percent. In fact, Prashant, if government employees had to spend their own money, which is in the bank to buy something for the festival season, they are effectively losing three percent interest with the savings account. That means 300 rupees. So what is the government giving you in that advance? The advance that the government is giving you, spending that the government is doing on you, the additional amount the government is giving is 300 rupees. 300, 350 rupees. And using that 300 rupees, it wants you to spend 10,000. So it is saying, here is a stimulus of this much. Please spend 33 times that much to make use of it. So this is the greatest stimulus package possible, a multiplier effect of 30 to 33 times of things which you've already budgeted. Which you've already budgeted. So it clearly seems that all these announcements fit into a pattern which the government has been doing for many years. The first repackage, whatever you already have, launch out a major publicity campaign. And in the end, actually do not end up really spending too much. The second thing with the COVID-19 stimulus package as well, which was tom-tom to the skies and nothing happened. And the total amount was way less. Absolutely. In fact, you can see that the government is still, is still going on about giving monetary stimulus, telling RBI to spend more. I think Shakti Kanthadasa said that the worst is over, except that he said 9.5% contraction. So the worst is over. There seems to be a concentrated effort. Ever since the IMF came up with this thing that India's GDP is going to contract. And it's going to be the worst performing in this year. I think there's been a concentrated effort to create a feel-good package. There's nothing wrong in that as long as you are also really spending. When it is just empty, essentially giving the same money which you've already budgeted, but you decided not to spend. There's another big story today in one of the pink papers saying government asks, says, departments can spend their budget. It's something like that. I mean, it's, you have budgeted something. You're saying don't spend because of COVID, right? And now you're saying that, okay, go ahead and spend. Yeah. What can you say to that? Absolutely. The only thing you can say is that governments will always spend. That is the job of a government, right? It is with the media to point out that this is not true. The media is not going to do that. Exactly. Well, in this context, I mean, I guess a lot of this really has to do with the question of demand itself, which we have been discussing, the fact that demand has been at historic lows and what needs to be done to kind of push this up. And this context has also been some news about car sales, for instance, picking up mobile phone sales, for instance, picking up. So can these be positive signs of some kind of a recovery? Or is there a story behind that? The story is the same as let's take the mobile sales, the smartphone sales shipment. I think for July to September has been the highest in ever. I think some 50 lakh mobile phone smartphones have been shipped. Many of them in the below 12,000 rupee category. Right. There's a side story here, which is that we are so anti Chinese that the Chinese companies share in the shipment has risen from 74% to 76% in the same July to September. But let's look at the fact that, you know, when we saw mobile phones with everyone, this was seen as a sign of prosperity in India. This is going on for the last 10 years that Indians, everyone uses mobile phones. And it's, they've become so prosperous. The point is this is, has become their office. 50, more than 50% of Indians are self employed. Right. Some of them are agriculture. Okay. Remove that part. But for those who are itinerant workers, plumbers, carpenters, electricians, hawkers, they no longer have the local store where they can go and sit or the local market where they can go and work. They are roaming around. They are called on the phone. So it is the office, which is why they found that massive club called the missed call club. Where they give you a missed call that I've come and you have to call back. So incoming is free. They don't want to spend. So therefore, I think that when you look at mobile phones, think of the stories anecdotal information we have that people are being forced to sell things to buy smart phones for the children because otherwise the children will not be able to get educated. Classes are being held online. Zoom, Skype, these are the routes through which classes are being held. And for children of the poor are being forced to do it on smart phones. We know what happened in Delhi where there was this girl whose phone was being snatched by two people and she ran after them. They were trying to stab her and she held on to them until she got her phone back. She said, my father bought this phone for my classes. I can't lose it. So to say that this is a sign of great prosperity is, I think, ridiculous. When it comes to cars, let's look at it. One of the things that we are seeing is that, and there's a story in one of the papers today or yesterday about how first time owners have increased dramatically. In the last two, three years, we had been hearing that how people are switching to share rights for all these large aggregators like Ola, Ober, people are using that. And it's true, even someone like me, for some trips, I would say, OK, I'm not going to take my car. I'll do Ola and Ober. It was cheaper because it was being subsidized. Now, you look at it, that has stopped. You can see that even a company like Maruti is worried that the cars that it specifically created for these large aggregators. I think there was something called the desire. I'm forgetting what the name is of a particular model, but it was largely created for these particular, and they're saying that these are not good to sell. So they're worried about that, and they're trying to think how to increase the sales of these particular variants. So we know that part is killed. So people are forced to buy cars because they have, they don't trust public transport. They're not, they're worried that if they take public transport, they'll be exposed to COVID. So they're buying cars. And some of it is replacement demand. Even replacement demand has actually dropped sharply this year. Most of it is first-time buyers who are saying, we have to buy cars because I can't afford to order a bike. And even then, if you look at it, if you look at April to September, there has been a sharp drop in total car sales. There has been a recovery in August and September, and maybe we'll see this recovery continue partly because people need to buy cars because they don't trust public transport and also because they didn't buy it from April to July. Every month, so many cars sell or they didn't sell. I mean, even Maruti's sales are down. If you take from April to September, I think it's down about 35%. Even though in August, September, there's been a gain compared to last year, significant gain in sales. So one has to remember these are all, these are expenditures which are being done per force. They're forced upon people because of the situation they're finding themselves in. And that means, and given today, one of the newspapers has reported that there's been a big recovery in, in, you know, people who are not being paid salaries, there have been salary cuts, but that has now recovered to a large extent. Now, of course, when you always, one of the things that one always has to do is read the fine print and you see that the fine print is essentially a few companies. And then, then it says 70% have got their salaries back. 70% have got part of the, some have got part of their salaries back. So I just did a Twitter poll this morning and it's obviously a very solid sample. It's a self-electing sample. It's not an, but it gives you some idea about what is happening. And I said that if you had a pay cut, this was only for those that pay cut, and there are about 430 votes here. It was a three-hour poll, right? And, and I can guarantee that the newspaper reports did not speak to 430 people. But still, right? I gave four options. Has your salary been fully reinstated? It has been partly reinstated. You're getting more than what you got before COVID because you have to remember that April, May, June is the settlement period. Where people get hikes that did not come. Instead, they got pay cuts and not being reinstated. You're still facing a pay cut. 66% have voted that they have still not been reinstated. Here we saw that 70% of the report tells us 70% reinstated. In my unscientific poll, unscientific self-selecting poll, 66%. Discount that further, make that 40%. Right? But even then, anecdotal evidence tells us that in most places it has not been reinstated. Fully reinstated, only 14%. Partly reinstated, 12%. More than pre-COVID levels, which means salary hike is 8%. 8%. And most of it, I would assume, would have come from the financial sector. And from brokerages and banks, which is what CMI's first amount of data tells us that hikes have actually only taken place in COVID in this period in only these places. Everywhere else, they've been pay cut. Absolutely. Thank you so much, Anandya, for talking to us. We'll keep tracking these issues as they continue to happen and as more such reports keep coming out. Thanks a lot. That's all we have time for today. We'll be back on Monday with more news from India and the world. Until then, keep watching News Click.