Union budget is the biggest opportunity for the Government to showcase its vision for the economy and industries. Life insurance industry can help channelise small savings into long term investments required for economic growth. Government should offer tax incentives to life insurance industry.
Upcoming first full year Union Budget of the Finance Minister, Arun Jaitley, would be carefully matched, as it is expected to provide directional clarity on the Modi Governments economic agenda. This is the time and the biggest opportunity for the Government to showcase its vision for the economy and industries.
The budgeted fiscal deficit of the centre is 4.1% of the GDP for the current financial year. In his last budget speech, the Finance Minister, had set the fiscal deficit target of 3.6% and 3.1% respectively for FY 16 and FY 17. Which given the need for providing growth to the current economy, may have to be revised. He may continue to reduce fiscal deficit through control on unproductive Government expenditure and increase in revenue.
A boost in the infrastructure development is critical for giving a minimum 100 bps push to the GDP growth rate. Current Account Deficit is another area the Finance Minister should focus on. During FY 15 a sharp fall in the international crude price and other commodities, decline in import of gold, helped improve trade deficit. However to further improve the status on Current Account Deficit; the Government needs to provide some boost to the exports. A competitive exchange rate of the Rupee and sharper policy focus on sector specific issues will help increase the country’s exports. A clear roadmap to support “Make in India’ will make the country an attractive destination for long term foreign capital. This will help boost the manufacturing sector which is proving to be a drag to GDP growth rate of the country. Tax reform in the coming budget is an urgent need. In this direction, push for GST is required. The GST will create a single, unified Indian market to make the economy stronger besides boosting tax collections.
In India household savings rate form a large part of the overall savings of the country. There is a need to channelize small savings for funding infrastructure development. Life insurance through its extensive retail reach and long term orientation can play a critical role as an aggregator of small savings, as separate limit in section 80CCE for deduction up to Rs. 1.5 Lacs for life insurance premium payments should be considered. We also expect the deduction limit under section 80D for health insurance premium to be increased from Rs. 15,000 to Rs. 50,000.
With growing population above the age of 60 years, and limited state supported social welfare schemes there is a need to promote private pensions in India. World over private pensions are dependent on tax incentives. The Government has made a right beginning by extending specific tax breaks under section 80 CCD(2) for NPS. It would be a reasonable ask that the same benefit be extended to IRDAI approved pension plans offered by life insurance companies.