New Delhi, January 11, 2023: Amid growing geopolitical uncertainty and economic concerns globally, the upcoming Union Budget FY 2023 – 2024 is likely to place a higher emphasis on boosting domestic resources of growth to maintain the current trajectory of India’s economic growth. We expect a continuation in government’s efforts to bring ease of business, boost capital inflow into the Indian economy, implement mass digital reforms, and further the agenda of financial inclusion. The Budget may also announce robust market borrowing, primarily to support its infrastructure development plans.
As India enters its Amrit Kaal and makes its journey towards 100 years of independence, the government will implement some critical reforms to support its development agenda. The insurance sector may be one such sector that sees some noteworthy changes. In fact, the government has already initiated some reforms.
The finance ministry recently released the Insurance Laws (Amendment) Bill 2022 for public feedback, wherein it has proposed a score of changes to the insurance policy framework including the distribution rules, capital requirements and more. The government is likely to introduce this Bill in the Budget session. These changes will significantly accelerate the growth of the industry and also support the government as well as regulator’s financial inclusion agenda. These proposed reforms will be a positive step in facilitating insurance adoption at the last mile and bolster the overall sectoral growth.
Barring this, here are some key industry expectations from Budget FY 2024:
- Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered under the 80C provision. Currently, all financial purchases are clubbed under the same IT deduction section (80C) capped at Rs. 1,50,000. We expect the budget to consider creating a separate section for tax deduction on premium paid towards life insurance. This will enable an effective segregation of customer’s funds into long-term and short-term kitties.
- Considering the low single-digit penetration of life insurance in India, tax incentives can be expected to be focused on first-time life-insurers and on principle component of annuity income. Special incentives may also be announced for women who currently account for barely more than one-third of the country’s life-insurance covers.
- GST rate rationalization from the current rate of 18% on term products may also help make it more affordable for the masses, who are keen on buying protection-oriented products like life insurance.
- India’s infrastructure sector is struggling as the traditional financiers, with their shorter-term sources of funding, are reluctant to extend loans, lest it skews their asset-liability balance. Life insurance companies with their long-term assets can help spur the country’s infrastructure sector, and consequently, its GDP growth. The government should consider this aspect as well, for incentivizing investments into Life Insurance products that will facilitate infrastructure and overall development of the country.
Corporate Comm India (CCI Newswire)
