India economy – Artifex.News https://artifexnews.net Stay Connected. Stay Informed. Fri, 17 May 2024 02:47:57 +0000 en-US hourly 1 https://wordpress.org/?v=6.6.2 https://artifexnews.net/wp-content/uploads/2023/08/cropped-Artifex-Round-32x32.png India economy – Artifex.News https://artifexnews.net 32 32 India’s 2024 economic growth projection revised upwards by U.N. to nearly 7% https://artifexnews.net/article68185210-ece/ Fri, 17 May 2024 02:47:57 +0000 https://artifexnews.net/article68185210-ece/ Read More “India’s 2024 economic growth projection revised upwards by U.N. to nearly 7%” »

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The 6.9% economic growth projections for India in the mid-year update is an upward revision from the 6.2% GDP forecast made by the U.N. in January.
| Photo Credit: B. Jothi Ramalingam

The United Nations has revised upwards India’s growth projections for 2024, with the country’s economy now forecast to expand by close to 7% this year, mainly driven by strong public investment and resilient private consumption.

The World Economic Situation and Prospects as of mid-2024, released Thursday, said, “India’s economy is forecast to expand by 6.9% in 2024 and 6.6% in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly.”

The 6.9% economic growth projections for India in the mid-year update is an upward revision from the 6.2% GDP forecast made by the U.N. in January this year. The U.N. World Economic Situation and Prospects (WESP) 2024 report that was launched in January had said that growth in India was projected to reach 6.2% in 2024, amid robust domestic demand and strong growth in the manufacturing and services sectors. The projection in January for India’s GDP growth for 2025 remains unchanged at 6.6% in the latest assessment of the economic situation.

The update said that consumer price inflation in India is projected to decelerate from 5.6% in 2023 to 4.5% in 2024, staying within the central bank’s two to six per cent medium-term target range. Similarly, inflation rates in other South Asian countries declined in 2023 and are expected to decelerate further in 2024, ranging from 2.2% in the Maldives to 33.6% in Iran. Despite some moderation, food prices remained elevated in the first quarter of 2024, especially in Bangladesh and India.

In India, labour market indicators have also improved amid robust growth and higher labour force participation, it said. India’s government remains committed to gradually reduce the fiscal deficit, while seeking to increase capital investment.

South Asia’s economic outlook is expected to remain strong, supported by a robust performance of India’s economy and a slight recovery in Pakistan and Sri Lanka. Regional GDP is projected to grow by 5.8% in 2024 (an upward revision of 0.6 percentage points since January) and 5.7% in 2025, below the 6.2% recorded in 2023. However, still tight financial conditions and fiscal and external imbalances will continue to weigh on South Asia’s growth performance. In addition, potential increases in energy prices amid geopolitical tensions and the ongoing disruption in the Red Sea pose a risk to the regional economic outlook, it said.

The world economy is now forecast to grow by 2.7% in 2024 (an increase of 0.3 percentage points from the forecast in January) and 2.8% in 2025 (an increase of 0.1 percentage points).

The upward revisions mainly reflect a better outlook in the United States, where the latest forecast points to 2.3% growth in 2024 (an upward revision of 0.9 percentage points since January), and several large emerging economies, notably Brazil, India and Russia.

It noted that several large developing economies – Indonesia, India and Mexico – are benefiting from strong domestic and external demand. In comparison, many economies in Africa and Latin America and the Caribbean are on a low-growth trajectory, facing high inflation, elevated borrowing costs, persistent exchange rate pressures and lingering political instability. The possible intensification and spreading of conflicts in Gaza and the Red Sea add further uncertainties to the near-term outlook for the Middle East, the mid-year update said.

Global trade is expected to recover in 2024. The early boost to trade flows in the first months of the year can be attributed to destocking of the inventory that piled up amid supply-chain disruptions in 2021-22. “China’s foreign trade grew faster than expected in the first two months in 2024, driven largely by exports to emerging markets, particularly to Brazil, India and Russia,” it said.

However, persistent geopolitical tensions in the Middle East and disruptions in the Red Sea, and escalating cost of freight continue to pose challenges to global trade, it added.

The mid-year update said global economic prospects have improved since January, with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment. However, the outlook is only cautiously optimistic. Higher-for-longer interest rates, debt sustainability challenges, continuing geopolitical tensions and ever-worsening climate risks continue to pose challenges to growth, threatening decades of development gains, especially for least developed countries and small island developing states.

The outlook for China registers a small uptick with growth now expected to be 4.8 per cent in 2024, from 4.7 per cent projected in January. China’s growth is projected to moderate to 4.8% in 2024, from 5.2% in 2023. Pent-up consumer demand – released after the lifting of pandemic-related restrictions – has largely dissipated. While enhanced policy support is expected to boost investments in public infrastructure and strategic sectors, the property sector poses a significant downside risk to the Chinese economy, it said.



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Flash PMI data: Combined manufacturing, services output rose at the fastest pace in nearly 14 years https://artifexnews.net/article68097297-ece/ Tue, 23 Apr 2024 08:11:31 +0000 https://artifexnews.net/article68097297-ece/ Read More “Flash PMI data: Combined manufacturing, services output rose at the fastest pace in nearly 14 years” »

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The Manufacturing sector Flash PMI stood at 59.1 in April, unchanged from March’s final reading for the index. File
| Photo Credit: Reuters

Combined output from India’s manufacturing and services sectors may have grown at the fastest pace in almost 14 years this month, with the services activity rising to a three-month high, as per the HSBC Flash Purchasing Managers’ Index (PMI) for April.

A spurt in international sales this month is reckoned to have bolstered new order inflows for manufacturing and services firms, with fresh export orders seen to have grown at the fastest pace since September 2014.

The Manufacturing sector Flash PMI stood at 59.1 in April, unchanged from March’s final reading for the index. The Services PMI, which stood at 61.2 in March, rose to 61.7 on the Flash PMI print for this month. A reading of 50 on the PMI indicates no change in activity levels. 

The Flash PMI scores for an ongoing month are based on responses from about 75% to 85% of 800 services and manufacturing players surveyed for the PMI that is available for each month in the first week of the subsequent month. “The composite output index rose at the fastest pace in nearly fourteen years, with the services PMI climbing further in April, led by a surge in new orders,” HSBC economists said in a note.

Mixed signals on hiring

Manufacturing firms accelerated hiring this month while services players slowed down on new job creation, the Flash PMI signalled, even as both sectors reported a dip in input costs. While manufacturers raised output charges, improving their margins this month, Services firms saw operating margins worsen with labour costs spiking. 

The orders-to-inventory ratio for manufacturers continue to remain above one, albeit moderated slightly in April. Overall business confidence ticked up in April and panellists expect further improvement in demand conditions over the coming year,” HSBC economists Pranjul Bhandari and Maitreyi Das said. 



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Success of India grounded in pursuit of reforms over last years: IMF MD https://artifexnews.net/article67803390-ece/ Fri, 02 Feb 2024 04:48:00 +0000 https://artifexnews.net/article67803390-ece/ Read More “Success of India grounded in pursuit of reforms over last years: IMF MD” »

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International Monetary Fund (IMF) Managing Director Kristalina Georgieva
| Photo Credit: REUTERS

The economic success of India is grounded in the pursuit of reforms over the last years, Managing Director of International Monetary Fund (IMF) Kristalina Georgieva said on February 1 exuding confidence that it would achieve its goal of being a developed nation by 2047 by staying the course.

“India has been a bright spot in the world economy, and it continues to be so. We are upgrading projections for Indian growth to 6.5% in 2024. This comes on the back of fairly strong performance in 2023. The success of India is grounded in the pursuit of reforms over the last years,” Ms. Georgieva told a group of reporters here.

Editorial | Poll posture: On the 2024 Interim Budget

Ms. Georgieva said that one very significant advantages of India is the bold actions on the digital front with the digital public infrastructure, digital ID and making digital a strong comparative strength of India allowing small entrepreneurs to tap into markets in the way they were not able to do before.

“We also see in India recognition that female participation in the labour markets is insufficient. I think Prime Minister (Narendra) Modi is right to bet on Indian women and open up more space for their participation in the economy,” she said.

“Last but not least, India recognizes that innovation is what is going to drive a future competitiveness, very effective and efficient investment in R&D as we saw with the moon landing. This creates a very fertile ground for future growth,” the IMF head said.

Also Read | India to emerge as third largest global economy by 2027: Finance Minister

“Where India needs to be watchful like all other countries, it has to be watchful how the strength of public finances and the use of public money support this medium long term objective of strong growth,” she said.

To a question on Prime Minister Modi’s call to make India a developed nation by 2047, when the country celebrates the 100 years of its independence, she said this is very much achievable.

“I see no reason why this will be unachievable. Stay the course,” Ms. Georgieva said hours after the Union Finance Minister in her interim budget said that the Modi’s government is working to make India a ‘Viksit (Developed) Bharat’ by 2047, and that this development would be “all round, all inclusive, and all pervasive”.

Also Read | Finance Ministry says economy likely to grow closer to 7% in 2024-25

The IMF managing director said staying the course also means eliminating obstacles for private entrepreneurship.

“I see in India as actually everywhere space for more to be done,” she said.

“This has been a very visible strength for India: confidence. And confidence not just in the leadership, (but also) confidence of the people. When I was last in India, I talked to people from all walks of life and there is that sense of confidence in the economy; confidence in the country,” Ms. Georgieva said.



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US May See Deep Recession, Could Impact India’s Markets, Exports: Economist https://artifexnews.net/us-may-see-deep-recession-could-impact-indias-markets-exports-economist-4458054rand29/ Fri, 06 Oct 2023 18:54:36 +0000 https://artifexnews.net/us-may-see-deep-recession-could-impact-indias-markets-exports-economist-4458054rand29/ Read More “US May See Deep Recession, Could Impact India’s Markets, Exports: Economist” »

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Mr Mishra said fertility rate is falling in India and net savings are increasing.

New Delhi:

The United States may see a deep recession soon, and such a scenario would impact not only India’s services sector, which is a key component of the country’s GDP, but also bring about a lot of volatility in the bond and equity markets, a top economist has said.

In an exclusive conversation with NDTV, Neelkanth Mishra, who is the Chief Economist for Axis Bank and the part-time chairperson of the Unique Identification Authority of India, said the United States was expected to enter a recession this year and it was thought its GDP growth would fall, but that did not happen. By the end of September, people thought that there would be a “soft landing” and there would not be a recession. 

“Our analysis says however that, this year, their fiscal deficit has gone up by 4% of their GDP.  They had targeted $1 trillion – their fiscal year ends on September 30 – and they ended up with a figure of $2 trillion. If the fiscal deficit is so high, there can’t be a recession. The problem for them, however, is that if they don’t keep increasing the fiscal deficit, they can’t sustain the economy’s growth,” Mr Mishra said. 

“Even if they manage to keep the fiscal deficit flat next year, which is a problem in itself, the economy will go into a recession. Because of the fiscal deficit being so high, no one is wanting to buy US bonds. Rates are rising because of that, and this is going to lead to a contraction in demand across the world. So, the recession that will happen could be a very deep one,” he warned.

India Impact

Asked about how this could impact India, Mr Mishra said the effects could be felt through four pathways. Services growth, which is already slow, would get slower. 

“If the US sees a recession. Our IT services industry and our business services exports could be hit. Services exports make up 10% of India’s exports. If they fall a lot, we could lose 1% of GDP growth,” he said.

The second pathway is the impact on goods exports. The economist said goods demand will fall. “It is already low in China, Europe and Japan and was above trend in the US. This could affect India’s goods exports,” he warned.

The bigger risk, he said, is dumping of products in India. Mr Mishra pointed out that If India remains the only country where demand is resilient, every manufacturer would like to sell here. This would adversely affect Indian manufacturers. 

The fourth problem is that a US recession would affect the yield on its government bond. 

“Cost of capital would go up for the other economies. Good borrowers in India, like famed steel companies, would get dollar loans easily earlier. But such loans have not been available for the past 6-8 months. This would bring about a lot of volatility in financial markets like bond markets and equity markets,” he said. 

Preparing The Country

“Price of crude oil has already started falling in the past two-three days because people have started fearing a recession. If the US goes into a recession in May-June next year, oil prices will come down. On the other hand, if oil prices rise, it will have a negative impact on the Indian economy,” he added.

On the steps India can take to tackle all of this, Mr Mishra said the focus should be on macroeconomic stability, as opposed to risk-taking, to be able to deal with the waves of turbulence. “Macroeconomic stability gives you growth for a longer term,” he asserted.

State Vs Centre

Asked about Morgan Stanley’s report stating that if India gets a stable government after 2024, the stock market will rise by 10% and could fall by 20-60% if that does not happen, the economist said this is a very wrong way of thinking.

“The impact of the central government on the economy comes in the medium term. It can be seen in a big way, but in 3-5 years. State governments have a bigger role to play in the near-term economic momentum – whether investments are being done by foreign and private companies – and this will not change,” Mr Mishra said.

He pointed out that the fertility rate is falling in India and the net savings are increasing. 

“This is being seen in the increased investment in equity markets – 30-35 billion dollars are being invested each year. A change in government will not affect this. Housing construction is behind this current strength in India’s economy, and this will not change either. Nobody will stop building their house if the government changes. According to me, this kind of sensationalist forecast is totally wrong,” he said.

What The Middle Class Should Do

On whether he has any advice for the middle class, Mr Mishra said, “The next year or year-and-a-half will be very turbulent for the global economy. If we are lucky, that is. If not, it could extend to five years. I would advise precaution. Looking at the Indian economy in the next 5-7 years, I don’t see too much of a cause for worry. Its trajectory looks good for now.”



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Data | The problems with the Prime Minister’s economic claims https://artifexnews.net/article67249426-ece/ Tue, 29 Aug 2023 16:43:25 +0000 https://artifexnews.net/article67249426-ece/ Read More “Data | The problems with the Prime Minister’s economic claims” »

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Official rhetoric on India becoming a $5 trillion dollar economy has resumed, with the Prime Minister’s remarks at the BRICS conference last week. However, these claims are riddled with problems.
| Photo Credit: Reuters

Addressing the BRICS Business Forum Leaders’ Dialogue at Johannesburg last week, Prime Minister Narendra Modi said, “Soon, India will become a $5 trillion economy.” In 2018, a working group under the Ministry of Commerce and Industry set 2025 as a deadline for achieving the same. The economic slowdown induced by the COVID-19 pandemic has upended the target deadline.

With the revival of the economy now, and the general elections on the horizon, official rhetoric on this count has resumed. While addressing the nation on the 77th Independence Day from the Red Fort, Mr. Modi noted that India was the world’s 10th largest economy in 2014, but now stands at fifth spot. He has also invoked a “third term” in office saying that India would be among the world’s top three economies by then.

Even if one ignores the political hubris and sidesteps the serious debate over the methodological rigour of India’s GDP estimates, the problems with the Prime Minister’s economic claims are manifold.

First, Mr. Modi is using nominal Gross Domestic Product (GDP) estimates to make claims about the size of the Indian economy relative to other national economies. This is wrong. Nominal GDP gives an estimate of the national output for a year at the prices prevailing in that year. However, the actual size of the economy is reflected in real GDP, which is adjusted for price changes. In other words, India can become a $5 trillion economy in nominal terms through high inflation, even without any significant changes in the economy’s output. It is for this reason that national governments, the United Nations, and other international agencies such as the World Bank and International Monetary Fund base their economic growth estimates on real GDP (price adjusted) and not nominal GDP (estimated at current market prices).

Second, international comparisons between national GDP estimates get further complicated because of exchange rate conversions. Researchers have long held that market-based exchange rates are not the appropriate way in which national GDPs can be converted into a common currency for comparison because of the existence of a substantial share of non-tradable commodities in national outputs as well as the innate volatility in market-determined exchange rates.

Going by nominal GDP, the Indian economy, valued at $3.39 trillion in 2022, ranked fifth in the world, as Mr. Modi said. However, in terms of real GDP, India’s economy in 2022 was $3 trillion and ranked sixth in the world. PPP-based GDP estimates (in terms of purchasing power parities estimated through price surveys of a common basket of commodities across countries) show that the Indian economy’s size was over $10 trillion in 2022. India’s PPP-based GDP has consistently expanded since the 1990s. India surpassed Germany in 2005 to become the fourth largest economy in the world and Japan in 2009 to become the third largest, a rank that has remained unchanged till date. 

Table 1 | The table shows the rankings for the 10 largest economies in the world in terms of PPP-based GDP, real GDP, and nominal GDP in 2022.

Chart appears incomplete? Click to remove AMP mode.

The third problem with Mr. Modi’s narrative regarding the size of India’s economy attaining new heights under his regime relates to its socioeconomic implications. Studies in economic development start with the premise that per capita income and output are the key indicators of a country’s standard of living, not the total size of the economy. Having surpassed China as the most populous country in the world, India’s per capita income (Gross National Income or GNI) and GDP continue to remain the lowest among all the countries in G-20, as depicted in Table 2

Table 2 | The table shows per capita income and GDP per capita for G20 countries.

This means that India is the poorest country in the G20 by per capita income. This is not to deny the importance of economic growth in advancing economic development but to underline the fact that being the most populous country in the world today, India needs to become not just the third largest but the largest economy in the world before it can claim to have attained a dignified living standard for the majority of its people. With almost equal populations in 2021, China’s per capita income (at 2017 prices) was PPP $17,504 while India’s was PPP $6,590; Brazil’s per capita GNI was PPP $14,370 and South Africa’s PPP $12,948.

Chart 3 | The chart shows the pre-tax national income by income groups in BRICS in 2021.

India’s low per capita income is further compounded by the skewed distribution of that income: 21.7% of its pre-tax national income went to the top 1% of the population in 2021 while only 13% went to the bottom 50% of the population (Chart 3). While in Brazil (9.1%) and South Africa (5.8%) the share of national income for the bottom 50% was even lower than India, China (13.7%) and Russia (15.7%) had higher income shares. This unfair reality of the top 1% cornering a disproportionate share of the national income in emerging economies gets concealed by official rhetoric on trillion-dollar GDPs and their growth.

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If India aspires to catch up with China or the U.S. in terms of GDP and per capita income, it needs to move beyond rhetoric and augment resource mobilisation and real investments in physical and human capital to levels much higher than what has been achieved till date.

Prasenjit Bose is an economist and activist. Samiran Sengupta and Soumyadeep Biswas are data analysts at CPERD Pvt Ltd, Kolkata

Source: World Development Indicators Databank, the Huma Development Report 2021-22, and World Inequality Database

Also read | Data | India’s GDP was on a downward slope even before COVID-19 wreaked havoc

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Indian economy shining as beacon of hope in challenging times, says PM Modi https://artifexnews.net/article67213349-ece/ Sat, 19 Aug 2023 13:26:46 +0000 https://artifexnews.net/article67213349-ece/ Read More “Indian economy shining as beacon of hope in challenging times, says PM Modi” »

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Prime Minister Narendra Modi digitally addresses an event in New Delhi on August 19, 2023.
| Photo Credit: PTI

Prime Minister Narendra Modi asserted on August 19 that India’s economy is shining as a beacon of hope in these challenging times.

“With robust growth and resilient spirit, the future looks promising. Let us keep this momentum and ensure prosperity for 140 crore Indians,” he said on X, reacting to news portal Moneycontrol’s ‘Bullish on India’ campaign.

 

The portal, which specialises in reporting on markets and financial sector, had posted on X that the country’s economy has not just withstood challenges, but thrived setting the stage for optimism.

The ‘Bullish on India’ campaign showcases India’s economic resilience and growth potential in various critical sectors, it said.

It aims to analyse the key drivers of India’s economic growth while fostering awareness about the unparalleled potential the nation offers at a time of a global economic slowdown, the portal said in a separate statement.

“With detailed analysis of macroeconomic factors such as manufacturing, demography, economy, markets and India’s rising stand in the global leadership, ‘Bullish on India’ has been presented as a data backed campaign that underlines India’s resilient economic growth,” it said.

The campaign seeks to analyse key drivers of India’s economic growth while fostering awareness about the “unparalleled potential” the nation offers at a time of a global economic slowdown, it added.

“There are various adversities that have shaken economies worldwide in the past few years. However, India is standing tall, retaining its stature as the ‘world’s fastest-growing major economy’,” it said, noting that the country is set to become the third largest economy in the coming years.





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Chief Minister Gehlot criticises Budget for reducing MGNREGS allocation, says disappointing for Rajasthan https://artifexnews.net/article66458599-ece/ Wed, 01 Feb 2023 12:24:49 +0000 https://artifexnews.net/article66458599-ece/ Read More “Chief Minister Gehlot criticises Budget for reducing MGNREGS allocation, says disappointing for Rajasthan” »

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Rajasthan Chief Minister and senior Congress leader Ashok Gehlot
| Photo Credit: PTI

Rajasthan Chief Minister Ashok Gehlot on February 1 criticised the Union Budget for neglecting the important areas of education, health and social justice and reducing the allocation by 33% for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which had proved to be a lifeline for the poor during the COVID-19 pandemic.

Mr. Gehlot said the Budget was against the poor, landless farmers and common people.

“Only headline-making hollow announcements have been made in the Budget… The provision for agriculture and farmers’ welfare is 6%, or ₹7,500 crore, less than the previous year. Similarly, there is a reduction of 15%, or ₹23,000 crore, in the subsidy for urea,” Mr. Gehlot said while reacting to the Budget.


Also Read | Explained | The funding and demand for MGNREGA

The negligible increase in the budgetary allocations for education, health and women and child development had shown that these areas would remain neglected, Mr. Gehlot said. Besides, the life of the common man would become even more difficult in the absence of any policy statement for reducing inflation, he added, while pointing to the spiralling prices of essential commodities.

The senior Congress leader said the Budget was “very disappointing” for Rajasthan, as the demand for giving national status to the Eastern Rajasthan Canal Project (ERCP), which would benefit 13 districts through interlinking of three rivers, had not been accepted. The project was directly related to the development of the State, he said.

“The Narendra Modi government has sanctioned ₹5,300 crore as an additional assistance to Karnataka for the Upper Bhadra Project, keeping the elections in mind. This shows the Centre’s step-motherly treatment towards Rajasthan,” Mr. Gehlot said.

Mr. Gehlot said the people of Rajasthan would give a “befitting reply” for the treatment meted out to them at the appropriate time.



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Budget 2023 | Exemptions on high-value life insurance proceeds pruned https://artifexnews.net/article66458344-ece/ Wed, 01 Feb 2023 10:37:40 +0000 https://artifexnews.net/article66458344-ece/ Read More “Budget 2023 | Exemptions on high-value life insurance proceeds pruned” »

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Image for representational purpose only.
| Photo Credit: The Hindu

The Union Budget 2023-24 has proposed to limit the income tax exemption on the proceeds of high value life insurance policies.

Mooted as part of an emphasis on better targeting of tax concessions and exemptions, the proposal means that only income from life insurance policies with an aggregate premium up to ₹5 lakh will be exempt from taxation.


Also Read | Budget 2023 | How is money allocated and where does it come from?

“It is proposed to provide that where aggregate of premium for life insurance policies [other than ULIP] issued on or after April 1, 2023 is above ₹5 lakh, income from only those policies with aggregate premium up to ₹5 lakh shall be exempt,” the Budget documents said. The proposal will not affect the tax exemption provided to the amount received on the death of the insured person, nor will it affect insurance policies issued till March 31, 2023.

This income will be taxable under the head “income from other sources”. Deduction will be allowed for the premium paid, if such premium has not been claimed as deduction earlier. There will not be any change in taxation for polices issued before April 1, 2023.Preventing misuse by the rich.

The proposal follows a measure initiated in the Finance Act, 2021 pertaining to the proceeds of ULIP policies, where the premium paid, for any year, exceeded ₹2.5 lakh. Both the previous and present moves are aimed at curbing misuse of the exemption by high net worth individuals, who invest in policies having large premium contributions and then claim exemption on the sum received under such policies.

The latest proposal, coupled with the income tax benefits that were announced in the Budget for those under the new tax regime, seems to have affected investor sentiments in life insurance stocks, with the shares of LIC, HDFC and SBILife taking a hit on Wednesday.



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