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India Inc speaks: Budget a mixed bag of good and adverse measures

This proposal is therefore a promise to pay one generation of policyholders at the cost of young and middle- aged generation of policyholders

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Ashwin Parekh
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In the backdrop of demonetization and GST impact uncertainties, there was a high order of expectations from various segments of the economy. In that context, this budget can be described as a flat or a bland one. It’s a mixed bag of some good measures and some adverse. Let’s look at the latter first.

Larger allocation to MGNREGA of Rs 48k crore is one of them. Then again, there is no tax reduction or concessions to the salaried class or to the honest taxpayers. There is a proposal to provide pension to senior citizen with assured 8 per cent return. In a falling interest rate regime, this will put the burden on LIC which must offer such assured return policies. Note that LIC does not have any capital contribution from the solvency capital requirements point of view, provided by the shareholders. It is contributed by the policyholders. This proposal is therefore a promise to pay one generation of policyholders at the cost of young and middle- aged generation of policyholders. This would discourage this age group from buying insurance products from LIC.

The larger positive stories are quite a few though in small measures. Reduction of corporate tax rates for MSMEs, considering affordable housing as infrastructure, abolition of FPIB and encouraging FDI in-flows are some of them. On the capitalisation of public sector banks, there is no additional support.

Ashwin Parekh, Managing Partner, Ashvin Parekh Advisory Services LLP

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