Devotees perform a ritual by lighting diyas (earthen lamps) on the occasion of Karthika or Kartik month in Hyderabad, on November 12, 2019. - Karthika or Kartik is one of the most auspicious months in the lunar calendar which begins on the day after Diwali, the Festival of Lights and ends after 30 days. It is considered very sacred by the devotees of Lord Shiva and Lord Vishnu. (Photo by NOAH SEELAM / AFP) (Photo by NOAH SEELAM/AFP via Getty Images)

Millions of Indians to get Diwali loans to boost battered economy

Millions of Indian public servants will be offered loans of around £104 ($135) –- to be repaid over 10 months — in a bid to boost spending and salvage the coronavirus-ravaged economy, the government said Monday.

The offer comes days after the World Bank said the economy would contract by nearly ten per cent this year, and coincides with next month’s celebration of Diwali, one of the country’s most important religious festivals.

Finance minister Nirmala Sitharaman said federal government employees would also be allowed to spend about £2.9 billion ($3.8 billion) worth of unused travel benefits — which are part of their salaries — on goods and services.

“Festivals are coming… and we want to tell you that in the next six months spend the money on buying goods that will help your family,” Sitharaman told a news conference.

With the loan scheme, the government will spend 80 billion rupees (US$1.1 billion) to give government employees a 10,000 rupee ($135 dollar) salary advance to be repaid over 10 months.

Sitharaman said the plan, aimed at encouraging Indians to spend some of their savings, would generate about US$4.9 billion for the economy.

The measures “would energize growth over the remaining part of the year”, the Federation of Indian Chambers of Commerce and Industry said following the announcement.

The government has also set aside (£1.2 billion) $1.6 billion for 50-year loans to states to spend on roads, defence and other infrastructure by March.

The stimulation measures would not fuel inflation or put public debt “on an unsustainable path”, Sitharaman said.

India has been easing a nationwide coronavirus lockdown since June but millions have lost their jobs.