The Finance Minister has presented a balanced budget in spite of the challenges on hand. Revolving around the theme of aspirational India, economic development for all and a caring society, the budget has focused on generation of employment and inclusive growth through increased expenditure on rural economy, infrastructure, MSME and healthcare. In the current economic scenario, the government seemed poised to draw clear plans to bring about long-term change in the economy.
As is well-known, the proportion of population in India falling in the productive working age bracket is highest in the world. By focusing on policies aimed at job creation and encouraging entrepreneurship, the government is all set to provide the desired incentives to harness the nation’s demographic dividend. Enhanced tax concessions to start-ups, along with low tax liability for ESOPs, will encourage the culture of entrepreneurship and drive employment. Alongside job creation, the budget focused on increasing the purchasing power of people in the country.
The budget committed to doubling farmer’s income and boost the infrastructure sector. The focus on the same will further promote inclusive growth and enhance consumption. Infrastructure focus will help putting India on a high growth trajectory, provided all the plans are executed on time.
The Finance Minister reinstated the fiscal deficit target of 3.8 per cent for FY20, which was in line with market expectations. Along with this, the finance minister announced significant measures towards strengthening a healthier India. Abolition of Dividend Distribution Tax will make companies distribute surplus corpus to shareholders. However, it will introduce tax at the marginal rate in the hands of investors. Moreover, tax relief to the common man along with simplification of the tax regime will widen the tax base and help revive economic growth.
The budget’s focus on creating a clean, reliable and robust financial sector towards promoting a strong economy had the common man at heart. Towards this end, the increase in the insurance coverage of fixed deposit from Rs 1 lakh to Rs 5 lakh aimed at bridging the trust deficit, increasing financial security and protecting household savings.
The listing of the Life Insurance Corporation is a good move that will bring focus on the sector. If executed well, this will help in meeting the disinvestment target and thus maintain the fiscal deficit at 3.5 per cent for FY21. Additionally, with the simplification of the income tax slab and the new tax charter, sectors including life insurance will have to watch out for its implication on 80C investments.
However, broad economic growth and more people joining the formal economy will provide impetus to the growth of the life insurance sector. It will further strengthen the national agenda of building a financially secure society.
This budget is focused towards sustainable growth and long-term growth prospects of the nation. The slew of measures in the budget, especially thrust on rural areas and employment generation showcases the intent of the government in extending from ease of doing business to ease of living – albeit over a longer time horizon.
(The writer is MD & CEO, Aditya Birla Sun Life Insurance)