The interim budget provides appealing tax relief to the middle-class segment of the society leading to higher disposable income and higher aggregate demand and potentially higher per capita savings.
The budget has provided stimulus to the real estate sector which will help to enhance the demand for home loans and eventually increase in mortgage protection.[/caption]The Interim Budget 2019-20 has made many announcements, which will immensely benefit the middle class and rural section of the society. The interim budget provides appealing tax relief to the middle class segment of the society leading to higher disposable income and higher aggregate demand and potentially higher per capita savings.
The growth in the real estate sector has been very sluggish over the last few years. There is a massive inventory with certain developers, leading to huge cost of capital for the Real estate Industry. The budget has also provided stimulus to the real estate sector by exempting the tax on the notional rent on 2nd self-occupied house for two years. The Finance Minister also indicated that the Government wants the GST burden on home buyers to be reduced and accordingly the GST Council was moved to appoint a Group of Ministers to examine and make recommendations in this regard at the earliest. It is expected that this will help to enhance the demand for home loans and eventually increase in mortgage protection (credit life) insurance and property/ home insurance business.
Jan Dhan Bank account opening has been a great story with opening of over 34 crore bank accounts. This is truly helping formalizing the rural economy and has immensely helped passing the social sector benefits and subsidies directly to the beneficiary accounts removing the middlemen. Digitization via opening of more common service centers (CSC) and plan to digitize 1 lakh villages in next year may help to reduce the cost of distribution of financial services products. It is expected that once digitization is achieved, insurance can be offered at much lower cost to the needy people in remote areas.
Ayushman Bharat is one of the largest healthcare programs of the world, which is likely to provide health benefits to over 50 crore of people can really change the landscape of the healthcare in India. This could really be a game changer in the history of healthcare globally. Once it is fully operational across the country, the program can generate large amount of data for analysis and help offering innovative health insurance products for other segments of the society.
Perhaps budget could have included some booster for the Pension Sector. Retirement benefit in India is very critical benefit for elderly people. It is important that government incentivize investments in long term savings in pension by having an explicit investment in pension Products. This could be on Exempt-Exempt-Tax (EET) mechanism. This is likely to ensure retiring people in future do not have to depend upon the resources from exchequer post retirement.
Overall, I believe the budget is people friendly and likely to be a big booster for economy.
(By Sunil Sharma, Chief Actuary & Chief Risk Officer, Kotak Mahindra Life Insurance Company)