Under the PM Awas Yojna (Rural) housing scheme, the government aims to facilitate construction of an additional 20 million houses over the next few years. File.
| Photo Credit: Ranjeet Kumar

India plans to increase state subsidies on rural housing in the upcoming Union Budget by as much as 50% from the previous year to more than $6.5 billion, after setbacks for the Bharatiya Janata Party (BJP)in elections, two government sources said.

The planned hike in housing subsidies is part of a broader government initiative to boost spending on rural infrastructure including village roads and a jobs programme to help millions of young people stuck in the agriculture sector amid limited manufacturing jobs.

If approved, it would mark the largest annual increase in central spending on the rural housing programme since its inception in 2016.

“The government is worried over widespread rural economic distress, driven by higher food inflation and sluggish growth in farmers’ incomes,” said one of the government sources with knowledge of budget discussions.

Shares of Housing and Urban Development Corp rose as much as 9% after the Reuters report, while Aadhar Housing Finance and GIC Housing Finance rose around 4.5%.

Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) is having to rely on allies to run the government for the first time in a decade, after the opposition did much better than expected in a bitterly fought national election that ended last month.

Under the PM Awas Yojna (Rural) housing scheme, the government aims to facilitate construction of an additional 20 million houses over the next few years, after providing aid for more than 26 million homes for poor households over the past eight years.

Finance Minister Nirmala Sitharaman is expected to announce details of plan during the budget presentation later this month.

“We expect a substantial increase in allocations for several rural schemes this year, including housing, roads and jobs programme,” said the second government source, noting central subsidies for rural housing could exceed ₹550 billion, up from ₹320 billion last fiscal year.

He said state spending on the rural jobs programme was expected to increase substantially from an earlier estimate of ₹860 billion, but the government may seek parliament approval for this additional spending later, not as part of the budget.

He said a separate proposal for increasing spending on village roads was also under consideration, from earlier estimates of ₹120 billion in the current fiscal year.

Both sources spoke on the condition of anonymity as they were not authorised to discuss budget proposals with the media.

During pre-budget consultations, economists and industry leaders urged the government to ramp up rural spending to stimulate consumer demand, noting that private consumption was growing at half the pace of nearly 8% annual economic growth.

The sources said to build 20 million houses for the poor in the rural areas, the central and state governments are expected to allocate up to ₹4 trillion over the next few years, with the central government contributing around ₹2.63 trillion.

A finance ministry spokeswomen didn’t comment when asked about spending plans.

Last month, shortly after assuming office, Mr. Modi’s cabinet announced plans to assist in the construction of 30 million houses in rural and urban areas, without disclosing financial details.

The Ministry of Rural Development has proposed increasing state subsidies to about ₹2,00,000 rupees per housing unit, up from ₹1,20,000 rupees previously, citing rising costs of raw materials, the second official said.

In a pre-Budget meeting with Finance Minister Nirmala Sitharaman, players demanded incentives in terms of affordable financing option and cheaper land for setting up hospitals in Tier 3 cities. File.
| Photo Credit: ANI

The healthcare industry on June 27 demanded incentives and increased allocations for the sector in the upcoming Budget.

In a pre-Budget meeting with Finance Minister Nirmala Sitharaman, players demanded incentives in terms of affordable financing option and cheaper land for setting up hospitals in Tier 3 cities.

“Prime Minister wanted 3,000 hospitals in the tier 3 towns with 100 bed which has not happened. So, we want government should incentivise private sector in terms of cheaper electricity, cheaper land, affordable loan and single window clearences so that these hospitals can be set up,” Association of Healthcare Providers of India (AHPI) DG Girdhar Gyani said.

Indian Red Cross vice chairman Anand Pandhari said the government should create a cell which will strengthen national education policy’s implementation.

This implementation of NEP would help in capacity building for the healthcare sector.

This was the ninth Pre-Budget consultation chaired by the Finance Minister where experts from health and education sectors gave their suggestions for the upcoming general Budget 2024-25.

The Pre-Budget consultation meeting was also attended by Union Minister of State for Finance Pankaj Chaudhary along with Finance Secretary and Expenditure Secretary, Secretaries of Department of Economic Affairs, Department of Revenue, and Ministry of Finance.

Besides, Secretary, Department of Higher Education and Department of School Education, and Health Secretary also participated in the meeting.

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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Union Finance Minister Nirmala Sitharaman presents the Union Budget 2023-24
| Photo Credit: PTI

The government plans to borrow a record ₹15.4 lakh crore from dated securities in FY24 to meet its expenditure requirement to prop up the economy.

This is higher than the total borrowing of ₹14.21 lakh crore for the current financial year ending March 31, 2023.

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

Finance Minister Nirmala Sitharaman while presenting the Budget on February 1 said the net market borrowings from dated securities are estimated at ₹11.8 lakh crore to finance the fiscal deficit in 2023-24.

“The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at ₹15.4 lakh crore,” she said.

The government has raised ₹12.93 lakh crore till January 27, which is 91% of the overall borrowing target of ₹14.21 lakh crore estimated for 2022-23.

The indebtedness of the Centre and State governments together is equal to 83% of the annual gross domestic product (GDP).

The Finance Minister retained the fiscal deficit target at 6.4% despite an increase in the subsidy bill.

“Coming to 2023-24, the total receipts other than borrowings and the total expenditure are estimated at ₹27.2 lakh crore and ₹45 lakh crore, respectively. The net tax receipts are estimated at ₹23.3 lakh crore,” she said.

She pegged the fiscal deficit at 5.9% of GDP for FY24.

“In my Budget Speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5% by 2025-26 with a fairly steady decline over the period. We have adhered to this path, and I reiterate my intention to bring the fiscal deficit below 4.5% of GDP by 2025-26,” she said.

Also Read | Budget likely to cap fiscal deficit at 5.8% for FY24; Centre’s borrowings to rise

Ms. Sitharaman had pegged gross market borrowing through dated securities for 2022-23 at ₹14,95,000 crore.

However, the government in September 2022 decided to cut the gross borrowing to ₹14.21 lakh crore during FY23. The gross borrowing for 2021-22 was ₹12,05,500 crore.

With regard to the net borrowing, the government estimated a record ₹11.6 lakh crore raising from the market in 2022-23.

This was nearly ₹2 lakh crore higher than the current year’s Budget estimate of ₹9.7 lakh crore.

The total market borrowings of the government for 2022-23 are estimated at ₹11,58,719 crore, according to the previous Budget document.

The revised estimates for the same for 2021-22 are ₹8,75,771 crore against the Budget estimates of ₹9,67,708 crore.

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