Post Budget Reaction – Deepak Sood, MD & CEO, Future Generali India Life Insurance Co Ltd.
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Macro level:
• Projection of higher GDP growth for FY 13, signalling the governments clear intent to fuel economic activity
• The government has tried to increase revenue by increasing the service & excise tax as well as bringing some more services into the service tax net, though nothing much has been done on rationalization of subsidies. Still 5.9% fiscal deficit looks realistic and achievable.
• Inflation is likely to remain high due to high crude prices and their spiraling effect.
• High fiscal deficit and higher inflation may not allow RBI to reduce interest rates.
• The budget is therefore not investment led, though GDP growth of 7.6% is achievable.
Equity Markets/Investments:
• There is not much to cheer the equity market, except the Income tax deduction of 50 per cent to new retail investors, who invest upto Rs. 50,000 directly in equities and whose annual income is below Rs. 10 lakh with a lock-in period of 3 years.
This may help in enhancing the retail investor base and provide much needed liquidity. However, this impact will again depend on the details of the scheme and how soon it is implemented.
Individuals:
• The exemption of Rs. 5000/- for health checkups is a positive move and will encourage more Indians to have regular medical check-ups, thus helping detect/prevent disease and health related issues earlier.
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Life Insurance Companies/Customers:
• Except for a marginal increase in the upper limit of the 20% IT slabs – that may result in some additional investible income for tax payers, there is nothing positive for the life insurance industry and some relief in the form of higher exemptions for Life Insurance investments would have been welcome.
•The increase in service tax will enhance tax outgo and hence will impact returns on life insurance policies for the policyholders along with other financial investments
