Impetus to Financial Security
Over the last few years, household savings as a proportion of GDP has witnessed a steep decline, with higher proportion of savings getting channelized to non- productive asset classes like gold and real estate. Household savings to GDP has reduced from a high of 25.2% in FY2010 to 18.2% currently, with financial savings / GDP ratio declining from 12.0% to 7.2% across the same period (Source: RBI data)
Revival of financial savings should be one of the key objectivesof this Government. This can be achieved by introducing additional tax incentives, small savings scheme, hiking tax exemption limits, increasing the exemption cap for home loans to allow consumers to save more etc., which should increase domestic savings rate.
Secondly, several studies have showedthat old age security will be a burgeoning issue for the country to tackle in the coming decade. The Government can manage this by giving a boost to pension plans of insurance companies & NPS through tax guidelines that encourage savings.
The third big problem that needs to be addressed is health security. Less than 1/5th of health expenditure is funded through insurance today. This leaves the poor and the marginal at huge risk, as health related out-of-pocket expenses leave several families without savings and many in debt.Even term insurance penetration remains extremely low in India, when compared to its peers and the risk cover per capita has declined in the past few years. A program to enrol individuals into the life protection pool on the lines of ‘Jan Dhan Yojana’ should be defined and aggressive targets introduced to increase the penetration.
Lastly, life insurance companies offer substantial direct and indirect employment across the country in addition to channelizing savings. Any growth in the life insurance penetration would have a multiplier effect on youth employability and will also provide the much needed insurance cover for individuals.
Make India attractive for Long Term Investments by Indian & Foreign corporations
While inflation is now trending lower than before, primarily due to slump in food and oil prices, and the rate cut cycle has been initiated, manufacturing, credit growth and other indices are yet to improve.
Injection of fresh capital, Indian &Foreign, will play an important role in the overall development and growth of the economy. To be positioned as an investment destination, it is critical for the Government to improvise the experience ofIndian &multi-national corporations operating in India. Various initiatives on this front can be taken by the Government, including single window clearance for new investment proposals, ensuring regulatory stability and better clarity on multiple tax regulations etc.
As the government is on the anvil of presenting its first full fledged budget, expectations run very high. It cannot afford to miss this ‘window of opportunity’ to drive home long term institutional changes for sustainable growth.
Mr Amitabh Chaudhry has been with HDFC Life since January 2010. HDFC Standard Life is today recognized as the premium brand in the insurance space and is one of the India’s largest private insurers. Before joining HDFC Standard Life, he was the MD and CEO of Infosys BPO Ltd and was also heading the Testing unit of Infosys Technologies Ltd.View Complete Profile
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