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Below is Post Budget Quote By Mr Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life

“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.”

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