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For Finance, Insurance Sector, Union Budget ‘23 Aids Ease Of Doing Business

The sector experts felt that by including the sector as a key priority area and focusing on ease of doing business, the FM has reinforced the power of Make In India

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With the Union Finance Minister Nirmala Sitharaman including the financial sector amongst the 7 priorities for the financial year 2023-24, the finance and insurance sector got the much needed boost it was looking for. Industry experts shared their views with BW BusinessWorld and here is what they said.  

Parminder Varma, Chief Business Officer, Sharekhan by BNP Paribas said: “Union Budget has reinforced our conviction on investment theme 3Cs. From an investor’s point of view, the Union Budget has further reinforced our conviction on the three investment themes of Capex, Credit & Consumption. Capex is high on the policy agenda this year also. The Budget proposed a 33% increase in capital expenditure allocation to Rs 10 trillion along with interest-free loans to the tune of Rs 1.3 lakh crore to state governments for infrastructure development.”

“In fact, the capital expenditure allocation has surged to 28.6% of revenue expenditure in FY2024 – more than doubling from 14% in FY2018 and highlights the improving trend in the quality of expenditure under the second term of this regime. In line with the three investment themes, our preferred picks are ITC, HDFC Bank, SBI, M&M, L&T, and Bharti Airtel among large caps while in the midcap/smallcap we like Cummins, Trent, Indian Hotels, Finolex Cables, Dalmia Cement, GNA Axles.”

Sarbvir Singh, President and CEO, said: “In the Budget 2023, it is laudable that the FM has kept improving the ease of business right at the centre of her announcements. In the insurance sector, everything hangs by the delicate thread of customer trust. Simpler KYC processes, enhanced DigiLocker services, and an overall push towards digital transactions will go a long way in improving customer experience. This in turn is bound to improve India’s insurance adoption and further accentuate the growth of our economy.”

Ritesh Kumar, MD & CEO, HDFC ERGO General Insurance Company said: “The Finance Minister has laid the foundation of the first budget in Amrit Kaal, by introducing affirmative steps in building a Digital India. This is evident from the impetus on digital public infrastructure and setting up the centers of excellence for Artificial Intelligence solutions, which will open doors of new opportunities in the areas of health and agriculture – two broad spectrums fueling the economic growth of the Nation.

"The plan to implement Data Governance Policy, encouraging simplified KYC based on a risk-based model is a progressive movement to ensure good governance and transparency. For Insurance Companies, this common pool of data will help to provide customized solutions, and also help in addressing issues like a fraud in the medium to long term." 

"We welcome the reiteration by the Finance Minister to review existing regulations by the financial sector regulators to simplify, ease and reduce the cost of compliance. IRDAI is already focusing on this area and has already started implementing simplified regulations to aid ease of doing business which will support in increasing insurance penetration in the country." 

"The government’s focus on driving insurance to the last mile continues, which is evident from the Finance Minister’s mention of PM Suraksha Bima and PM Jeevan Jyoti Yojana, which has provided Insurance cover to 44.6 crore Indians. This, combined with the focus on financial literacy awareness, as mentioned by the Finance Minister will certainly help increase awareness around the importance of insurance and aid higher penetration across the length and breadth of the country.”

Vijay Chandok, MD & CEO, ICICI Securities said: “The Union Budget is a testament to the government's vision of achieving a technology-driven and knowledge-based economy, with strong public finances. The government’s focus on capital allocation is a clear indicator of its intention of bolstering growth and employment in the country. We believe the increment in capital investment outlay for the third year in a row by 33 per cent to 10 lakh crore will empower the government to create an efficient ecosystem that renders extensive growth and prosperity in the country.”

“The new proposed tax regime will provide major relief to all taxpayers, especially middle-class people, by providing higher disposable income in their hands. This will enable them to explore more investment avenues and leverage the increasing prowess of the Indian economy. Further, the government's decision to allow SEBI to develop, maintain and implement norms and standards for education in the National Institute of Securities Markets (NISM) will enhance the competencies of functionaries and professionals in the securities market.”

Abhay Bhutada, Managing Director, Poonawalla Fincorp said: “The 2023-2024 Union Budget presented by FM Nirmala Sitharaman has a focus on "janbhagidari" and seven pillars for a technology-driven, knowledge-based economy. The budget empowers the middle class with reduced tax rates and more spending power and supports the MSME sector with the improved credit guarantee scheme and reduced compliances. Digitisation and expanded services such as Digilocker and the National Financial Information Registry will enhance financial security and transparency. The budget sets a foundation for a brighter future in India and its successful implementation is crucial for the nation's growth in the financial industry.”

Trideep Bhattacharya,  CIO-Equities, Edelweiss MF said: “The budget is a 'Panchamrit' budget, balancing growth with reasonable prudence. It has an increased focus on capital creation, demonstrated by the 3.3% of GDP spent on capital expenditure, which is three times the outlay of FY20."

“The budget has the potential to boost consumption across the pyramid, with direct tax benefits at both the lower and higher ends, including an increase in rebates at the lowest tax slab and a reduction in the tax rate at the highest tax slab. It also features targeted rural spending through food grain schemes"

Suresh Agarwal, MD & CEO, Kotak Mahindra General Insurance Company said: "Taking it a notch above the expectations of the middle class, the budget has special thrust on women and youth which makes it truly citizen-centric. To remain the fastest growing major economy in the world, it demonstrates the government’s intent to improve a taxpayer’s purchasing power through income tax rebates, enhanced grievance redressal mechanism for direct tax payers and capital deductions from capital gains on investments, while being overall fiscally prudent to address inflation. Further, rolling out a host of initiatives to support domestic industries, the budget sets positive sentiments in placing India in a resilient position amidst a global slowdown."

Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance said: “Overall, the Budget has been very positive with fiscal prudence and with a clear focus on overall growth. As India continues to strengthen its economy, this Budget has laid the foundation for long-term growth across all sectors – for agriculture, fintech, infrastructure, social welfare, tourism and so on. It is balanced well with both Capex and consumption push. The Fiscal Deficit consolidation to continue from 6.4% of GDP for FY 23 to 5.9% in FY24.”

“From the perspective of financial services, initiatives such as KYC simplification and the larger push within the digital ecosystem will benefit us. The new tax regime has been made more attractive by introducing a standard deduction of INR 50,000 that was earlier available only under the old tax regime (for salaried individuals) and changing the income tax slabs. Further, under the new tax regime, the rebate limit has been increased from INR 5L to 7L (implying that individuals with income of up to INR 7L will not have to pay personal income tax).”

“The budget announced that for non-ULIP (traditional) insurance policies issued from the new fiscal year, income from only those policies with aggregate premiums up to Rs 5 lakh shall be exempt. This is bit of a dampener for the insurance industry and for increasing penetration of insurance and household financial savings in India. India still has quite low insurance penetration and there is a need to provide measures and incentives to boost that in the coming years. Also, household financial savings have been falling in India and insurance is a critical component of that. Household financial savings (as a % of GDP) has fallen from 8.1% in FY20 to ~6.5% in FY23 (as per estimates). Discontinuing incentives on insurance plans should put further pressure on household financial savings to some extent."

Sarosh Amaria, Managing Director of Tata Capital Financial Services said: “We welcome this robust support from the Government in this #AmritKaalBudget. The entity-wise Digi-locker will help in easing the process of digital applications. The infusion of ₹9,000 crores in the revamped Credit Guarantee Scheme is enabling MSMEs with an additional collateral-free credit of ₹2 lakh crore thereby plugging working capital gaps for small businesses.”  

Umesh Revankar, Executive Vice Chairman, Shriram Finance said: "The union budget 2023-24 is a growth-oriented budget and the FM has checked all the boxes – from consumption to capex to spending to middle class to industry. The income tax benefits announced will boost purchasing power for middle-class consumers. It’s a capex-heavy budget, with an announced 33% increase in capex, which will boost infrastructure, logistics and the transportation business. The government’s focus on Ease of doing business and the expanded corpus for the credit guarantee will mean MSMEs have a lot to gain from this budget. Agriculture and rural development have been given detailed attention which should boost the rural economy and consumption. I believe the announcements made will trigger a pick-up in credit off take for small enterprises, the consumption-driven 2w business and lending to transportation."

MS Sreedhar, MD & CEO, Royal Sundaram General Insurance said: “The government announced various investment-based programs across crucial infrastructure sectors, including urban development, logistics, technology ecosystem and green projects. At the same time, focusing on reaching the last mile, empowering fintechs, and tax incentives strengthen its inclusion agenda. A host of initiatives around data and information repositories (National Financial Information Registry, Common Business Identifier, KYC Simplification, Central Data Processing Centre, etc.) will lead to an efficient, secured and integrated data access ecosystem. The Insurance sector will gain from the increased economic activities and greater ease of doing business. At the same time, announcements such as vehicle replacement policy, Digital Public Infrastructure for Agriculture, a higher rebate on personal income tax and a more significant focus on public health will also substantially impact the non-life insurance sector.”

“Being now the most populous country in the world, India has built a robust foundation consisting of demographic dividend, economic stability, tamed inflation, improved incomes, phygital distribution network and above all, better awareness towards insurance. The success of health insurance in the past decade – backed by strong government resolve to offer low-cost access has set the right context for the sector. We believe the industry has just scratched the surface and will ride on a high degree of customisation and product innovation in the coming years”.

Bhargav Dasgupta, MD & CEO, ICICI Lombard said: “The Union Budget FY23-24 is an extremely progressive and inclusive one with a huge focus on infrastructure and capex growth while maintaining the fiscal consolidation path. With fiscal deficit being reduced to 5.9% whilst providing an extremely bullish capex investment of Rs. 10 lac crs (highest ever); will in effect convert revenue expenditure to capital expenditure which has a higher multiplier effect.  It will also mean net borrowing by the Govt being lower than anticipated at Rs. 11.8 lac crs and those augurs well for the bond market and the corporate sector as a whole.”

“Moreover with tax relief at an individual level would mean an additional Rs. 35,000 crs available for consumption. Fuelled by the ease of doing business-related policies and regulations, this will bolster growth, especially in the highly regulated financial services space. For a category like general insurance, these macroeconomic indicators would provide the much-needed thrust for bridging the penetration gap in the country.”

“There are some pertinent developments that will enable growth for the industry in the longer horizon. The focus on tourism will pave the way for not just generating employment and investments but also travel insurance in the long term. We have always been zealot about capacity and capability building in the health arena and the government setting up nursing colleges is a positive development. In fact I believe the CoE on AI being set up could be a game changer with access to the right talent pool in India. On the auto front, the old vehicle and ambulance scrapping policy is a step in the right direction. Overall, the budget this year has been growth-oriented while also being fiscally responsible which is laudable.”

Sanjiv Bajaj, Jt. Chairman & MD, Bajaj Capital said: “The Indian Budget 2023 has a significant focus on the financial sector, which is expected to have a profound impact on the industry and its customers. The proposed capital investment of 10 lakh crore is a significant step towards promoting financial stability and growth in the country. This investment is expected to drive economic growth and create new wealth-creation opportunities, particularly through the potential increase in asset management funds in India.”

“The budget's emphasis on digital transformation in the financial sector is also expected to have a positive impact. The government's aim of simplifying and streamlining financial processes will make it easier for customers to access financial services, reducing barriers to entry and increasing accessibility. The government's plan to leverage digital tools such as DigiLocker and Aadhaar will make personal identification easier, streamlining the Know Your Customer (KYC) process for financial services. This will make it easier for customers to access financial services, potentially increasing the number of people who have access to these services.”

“The budget's focus on the financial sector reflects the government's commitment to promoting economic growth and financial stability in the country. By leveraging technology to drive innovation and create opportunities for all citizens, the budget aims to make financial services more accessible and improve the overall financial health of the country. The increased focus on the financial sector is likely to attract more investment, create new jobs, and drive growth in the industry, ultimately benefiting both the industry and its customers.”

Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life said: “The core focus of the budget has been to provide a boost for infrastructure / capex, tax incentives under the new tax regime (which will help to boost consumption), continue on the fiscal consolidation glide path and also offer incentives for MSMEs and informal sector. The budget was a growth oriented one with central government capex budgeted to rise by 33% to Rs. 10 lakh crore in FY24 (3.3% of GDP). This should help to boost the investment cycle in India, which is already in recovery mode, and will also help to encourage private sector capex. With some economic slowdown expected in FY24, it will aid to keep the investment engine firing in India, and support India’s economic growth trajectory.”

“Despite the increased capex spending, the fiscal deficit target has been reduced from 6.4% in FY23 to 5.9% in FY24, and as a result the market borrowing figure was also below estimates. This has helped the fixed income markets with bond yields falling significantly post the budget announcement.”

“In the financial sector a boost has been provided to small savings schemes, and therefore this segment should continue to play an important role in financing the budget deficit, with increased flows expected there.  However, the government announced that only traditional insurance policies with annual premium of upto Rs. 5 lakhs bought from FY24 onwards will be tax-exempt, and this is a bit of a dampener to insurance industry. It may deter insurance penetration in India and also be a constraint on household financial savings (to some extent), which have already been on a decline in the past few years.”

“On the taxation front, the government has provided further tax incentives under the new income tax regime, to incentivize the same and prompt more middle class tax payers to shift to the new regime. The income tax slabs have been changed in the new regime and the government has extended tax rebate from Rs. 5 lakhs to 7 lakhs (implying that individuals with income up to 7 lakhs will now be exempt from personal income tax). Also, the highest surcharge rate has been reduced from 37% to 25%, which will reduce the peak taxation rate in India from 42.7% to 39%. This could encourage high income and high net worth individuals to also shift to the new tax regime. The government has not introduced any change in the capital gains tax regime, as was expected by some market participants, which is also a positive development.”

Dr Rupa Rege Nitsure, Group Chief Economist, L&T Financial Services said: “While the Budget is market-friendly in terms of every asset class, it reflects good fiscal prudence on the back of subsidy rationalisation. As in the past three years, its underlying macroeconomic framework and revenue growth assumptions are conservative and realistic. A strong capex push by the Central Government was the need of the hour. But its objective will be fulfilled if and only if the State Governments as well as the private sector start raising their fixed investment spending. A push to grow without compromising macro-financial stabilisation should improve India's score in terms of fiscal sustainability.”

Nalin Negi, CEO (Interim) & CFO, BharatPe said: "We warmly embrace the Union budget 2023. Fintechs have come a long way over the last few years, and the Government’s initiatives to drive financial inclusion and enable digital payments have been one of the key drivers of the growth journey of this sector. Fintech services in India have been facilitated by India's digital public infrastructure including Aadhaar, PM Jandhan Yojna, video KYC, India Stack and UPI, and digital payments have grown by 76% in transactions in 2022.”

“In this budget, FM Nirmala Sitharaman has reimagined the government's Digilocker services for the fintech sector. This will further aid the growth of the sector, along with the Government’s continued support to drive digital payments. Also, the government’s plans for encouraging countries looking for digital continuity solutions to set up data embassies at the GIFT City will further help position India as a global leader in the fintech industry. Technological advancements can give us the edge as we strive to become a US$ 5 trillion economy. The announcement of the setting up of Centres of Excellence for AI will fuel the focus on technology and innovation. Also, the National Data Governance Policy that will bring in innovation and research by startups and academia will enable access to anonymized data.”

Sonali Kulkarni, Lead, of Financial Services, Accenture in India said: The focus on improving credit access and creating digital public infrastructure for agriculture along with the existing Agri-stack (India Digital Ecosystem of Agriculture ) will unlock new growth opportunities for agri-tech SMEs and entrepreneurs as well as farmers.  Access to granular data via these digital initiatives will enhance access to agri-credit for this segment and also drive new business models for banks as a result of better credit discovery and risk management."

Further, she added, "The extension of the Digilocker facility to enterprises and MSMEs, KYC reforms, a more integrated approach towards identity management processes, and ongoing innovations to the India Stack will help banks, NBFCs, and fintech to underwrite better and more efficiently. Even though clarity on the exact contours of the National Financial Information Registry is awaited, it seems to be a step in the right direction towards more efficient and transparent access to credit. Finally, the expanded credit guarantee scheme for MSMEs will be critical to continued economic growth across industries and expanding employment opportunities.”

Shailendra Singh, MD & CEO, BOB Financial Solutions Ltd said: "We welcome this all-encompassing Amrit Kaal budget of 2023 that ensures there is something for everyone. The push on digital public infrastructure and the national information registry for lending is a great upside for credit growth in India. There is a continued focus on agriculture through the allocation into growing agri credit to dairy, fisheries, animal husbandry, etc. The allocation of ~80K crs to PMAY is a good push towards housing for all. For the MSMEs, the increase in allocation for credit guarantee schemes will continue to provide a boost to the small manufacturing sector of India. Most of all, the allocation of capex of 10 Lac cr – the highest ever – is a big plus. It is empirically proven that 1 Re of capex would lead to 7X return over the next few years. This would go along law to make India a 10 TN USD economy."