News Nation Logo

BREAKING

Budget 2016: Expectations of different sectors from Mr Arun Jaitley?

The Budget Which Will Be Out In Another Week Has Set Several Challenges Ahead Of Modi Government. We Take A Look At The Expectations Of Different Sectors:

PTI | Updated on: 22 Feb 2016, 06:12:07 PM

New Delhi :

The Budget which will be out in another week has set several challenges ahead of Modi government. We take a look at the expectations of different sectors:

FDI in insurance sector

Government is considering a proposal to permit 49 per cent FDI through automatic approval route in the insurance sector with a view to attracting more overseas inflows.

Currently, FDI up to 26 per cent is permitted through automatic approval route. For FDI up to 49 per cent, the approval of Foreign Investment Promotion Board is required.

According to sources, the government could announce this decision in the forthcoming Budget as the move would help in improving ease of doing business also.

“If IRDAI is looking at the proposal, RBI too is looking at and the management is in the hands of Indian then the government may do away with the FIPB approval route,” they said.

At present, as many as 10 proposals, including that of ICICI Prudential Life, ICICI Lombard General Insurance and Aviva Life Insurance, are pending at different stages of clearances.

There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in the general insurance. State-owned General Insurance Corporation (GIC), in addition, is the sole national reinsurer.

In order to deepen the re-insurance market, IRDAI permitted UK-based Lloyds to set up business in India.

Lloyds India will ensure that the market and the constituents are housed in one location for the conduct of reinsurance business.

Foreign direct investment (FDI) in the country more than doubled to about USD 4.5 billion in December.

The major sectors that attracted foreign inflows include computer software and hardware, trading, services, automobile and telecommunications.

India receives maximum FDI from Singapore, Mauritius, the Netherlands and Japan.

In 2014-15, foreign fund inflows grew 27 per cent to USD 30.93 billion as against USD 24.29 billion in 2013-14.

Fiscal deficit target

Government can change its fiscal targets and instead go for a longer route to the 3 per cent target to support demand till the time private sector recovers, a survey of tax and finance executives has revealed.

The survey, conducted by Deloitte India, also opined that a business-friendly tax administration and speedy resolution of tax disputes were critical for the success of Make in India campaign.

“Majority (62 percent) of the survey respondents believe the government can change its fiscal targets and instead opt for a longer route to the 3 per cent target for the fiscal deficit.

“The purpose is to have a counter cyclical policy and support demand till the time the private sector is able to recover. An overwhelming, 90 percent said public sector needs to give a boost to infrastructure spending,” said findings of the pre-budget expectations survey by Deloitte India.

As per the survey findings, 30 per cent respondents expected an increase in the basic exemption limit from Rs 250,000 to Rs 300,000.

Further, similar to that of bringing down the corporate tax rate and phasing out the deductions/exemptions majority were of the view that the individual tax rates should be brought down over time.

The government had last year postponed reduction in fiscal deficit target by a year. The government is targeting a fiscal deficit of 3.9 per cent of GDP in the current fiscal.

Finance Minister Arun Jaitley will present the Budget in Parliament on February 29.

The survey, Deloitte India said was conducted in January with tax and finance executives of over 130 mid to large Indian companies and MNCs based in India.

Almost 79 per cent of the respondents opined a business friendly tax administration and speedy resolution of tax disputes were critical for the success of ‘Make in India’.

On phasing out of tax holidays or incentives and reducing the corporate tax rate from 30 per cent to 25 per cent, as many as 58 per cent agreed that complete phase-out of tax incentives is a good measure and will reduce litigation.

The survey further said majority of the respondents have expressed a desire that the scope of Section 80C of the Income-tax Act be pruned to cover investment linked deduction, with an enhanced limit (higher than Rs 150,000).

In addition, the category of specified expenditure under Section 80C (such as tuition fee, repayment of housing loan principle) should be carved out as a separate deduction.

Over 70 per cent of the respondents were also of the view that for ease of doing business, having a transparent system driven by process with minimum discretion is the most important factor.

Health insurance

Government is working on a cashless health insurance scheme for senior citizens which may be announced in the upcoming Union Budget 2016-17.

Around Rs 10,000 crore—lying unclaimed in banks and insurance companies, EPFO and small savings schemes—would be utilised for providing the health insurance cover to the elderly, sources said.

Senior citizens are often dependent on their children or extended families for healthcare, they said, adding that the proposed scheme will help in meeting secondary and tertiary health care needs.

The quantum of insurance cover would be more than Rs 50,000 for person over 60 years.

Finance Minister Arun Jaitley will present the central budget for the next financial year on February 29.

The proposed scheme will be administered by the Department of Financial Services under the Finance Ministry.

The government proposes to link this scheme to bank accounts of beneficiaries to directly transfer the subsidised amount to the accounts. As per the proposal, the government would subsidise the premium for those below poverty line by up to 90 per cent through cash transfers to their bank accounts.

It’s not that the government will forfeit these unclaimed funds, sources said, adding that if claimants come forward they will be paid because the fund would be revolving in nature, sources said.

Health insurance scheme for senior citizen would be a logical extension of the ongoing low premium life insurance (Pradhan Mantri Jeevan Jyoti Bima Yojana), general insurance (Pradhan Mantri Suraksha Bima Yojana) and pension plan (Atal Pension Yojana) of the government, sources said.

The Pradhan Mantri Jeevan Jyoti Bima Yojana offers a renewable one-year life cover of Rs 2 lakh to all savings bank account holders in the age group of 18-50 years, covering death due to any reason, for a premium of Rs 330 per annum.

The Pradhan Mantri Suraksha Bima Yojana offers a renewable

one-year accidental death-cum-disability cover of Rs 2 lakh

for partial/permanent disability to all savings bank account

holders in the age group of 18-70 years for a premium of Rs 12 per annum per subscriber.

The Atal Pension Yojana focuses on the unorganised sector and provide subscribers a fixed minimum pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 per month, starting at the age of 60 years, depending on the contribution option exercised on entering at an age between 18 and 40 years.

Banking and Finance

The forthcoming Budget is likely to set out a clear agenda for revival of banking sector, including setting up of a ‘bad bank’ and an aggressive roadmap for recapitalisation, SBI Research said in a note today.

State Bank of India in a research note said it is “time for a bad bank” as lenders are dealing with close to Rs 6.5 lakh crore of stressed assets, which do not include write-offs of bad debt.

A bad bank purchases or takes over troubled loans and then attempts to restructure and manage these assets in a way that maximises their value.

The report noted that the agenda for revival of banking sector must also include an aggressive roadmap for recapitalisation, bringing down government ownership in PSBs, incentivising public savings, tax breaks for IFSC banking units and making wilful default a criminal offence.

The government must amend the tax system to ensure the country evolves into a vast integrated domestic market thus reducing its dependency on rest of the world for growth, the report added.

It further said, the government should make a clear communication that it is committed to the path of fiscal consolidation and added that the effective fiscal deficit for financial year 2016-17 may be set at 3.8 per cent of GDP.

Regarding Reserve Bank’s monetary policy stance, it said “we expect an aggressive monetary policy accommodation by RBI after budget and it could be more than 25 bps”.

Meanwhile, RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy on government’s budget proposals.

For all the Latest Union Budget 2016 News, Opinion Budget 2016 News, Download News Nation Android and iOS Mobile Apps.

First Published : 22 Feb 2016, 05:54:00 PM

Videos