With Budget 2023 being characterized as a Pro growth and Capex oriented budget, India Inc reckons Budget 2024 to be another elixir to sustain the current pace of economic growth. The government will adeptly do a fine balancing act of sticking to the fiscal prudence path, while focusing on pro-growth measures, according to leaders.
With the backdrop of India’s goldilocks economic landscape viz. receding inflation, resilient GDP growth, contained CAD, the Interim Budget 2024 is likely to leverage on the same and try to pump prime the economy.
The focus is largely expected to continue to be on structural growth enablers such as continuing focus on infrastructure, additional sectors under PLI (production-linked incentive) scheme for manufacturing push and sustained push towards green energy transition.
“The budgeted capex orientation is likely to stay although the growth is likely to moderate from its peak 35% growth seen in the recent past. Besides with the impending pivot of Monetary policy towards the rate cut cycle, the fiscal pro-growth measures would get the requisite support and manifest in the growth numbers,” Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance said.
Importantly as it’s a Pre-election Interim Budget, the focal point would continue to be upliftment and growth of the bottom of the pyramid by way of announcing some welfare measures on rural / Agri schemes. Overall, we expect the budget to give the requisite structural push for economic growth, he added.
Insurance asks from the Budget long overdue
For insurance in particular, in the backdrop of the IRDAI’s vision of ‘Insurance for All by 2047’, the industry and policyholders are hopeful for encouraging changes in the Union Budget 2024 which is scheduled for 1 February, 2023.
Changes such as increase in 80D deduction limits to better suit rising healthcare expenses, separate tax benefits for life insurance which is distinct from 80C, lowering GST rates for life and health insurance covers, and even considering zero rates for some basic covers, Shailaja Lall, Partner, Head – Insurance & Reinsurance at Shardul Amarchand Mangaldas & Co. highlighted.
“The industry will also keep an eye out for announcements on the previously proposed amendments to the Insurance Act (such as composite license, different capital for classes of business, reduction in solvency norms, captive license and permitting insurers to engage in other activities such as distribution of other financial products,” she said.
The industry has been asking the government to introduce a separate tax deduction limit for life insurance for the last 5 to 6 years but nothing has happened.
“The reason is that the current Section 80 C is too cluttered where a person can claim deductions up to Rs 1.5 lakh for PPF, Sukanya Samriddhi Scheme, ELSS, tax saving fixed deposits, school fees, principal sum of a home loan, including life insurance,” explained Vighnesh Shahane, MD & CEO, Ageas Federal Life Insurance.
Also Read: BFSI honchos discuss what’s in store for Union Budget 2024
“The other demands are to make pensions tax-free in the hands of annuitant. The current Rs 50,000 tax exemption for the National Pension Scheme under Section 80CCD(1B) should also apply to pension and annuity plans of insurance companies to provide a more level playing field,” he expressed.
A relook at the GST rates on insurance premiums needed
While tax incentives act as positive nudges to take the right decisions, over the past several years the orientation has been towards simplification of the tax structure and reduction of incentives.
While that stance may not change, the level of GST rates is worth revisiting as it will go a long way in improving affordability of insurance, said Asha Murali, Partner, Actuarial Services, BDO India.
“A relook at the GST rates on insurance premiums is a reasonable expectation from the budget. Social security measures are still evolving in the country. Insurance for all is the need of the hour to protect oneself and dependents from hardships arising from unexpected circumstances,” she pointed
