The 2020 annual budget came as a disaster for the Life Insurance Corporation of India and IDBI Bank as the government of India has planned to sell part of its holding in LIC through IPO and its entire stake of IDBI bank respectively. Currently, the government holds the entire stake of LIC.
Divestment seems to be a childhood dream of the BJP-led NDA government. The idea of the divestment of Air India and Bharat Petroleum adds weight to the previous line. Shreekant Mishra, General Secretary of the All India Insurance Employees Association, has called for the strike to oppose the following idea.
“Union Finance Minister today announced while presenting the Budget that LIC would be listed in the Stock Exchange and the government would sell part of its stake via a public offering. As decided in the 25th General Conference of AIIEA, we request our units in LIC to go for an hour walkout strike preceding Lunch recess on 4th February as an immediate protest action. We are in touch with other unions in LIC for a Joint Strike action. Almost all of them have responded positively and have assured to come back to us by the evening. Our units in general insurance should go for lunch hour demonstrations on the day of the strike,” said Shreekant.
According to the AIIEA, the LIC is growing at a rate which is much more than the growth of GDP. The last six months of this financial year have been particularly phenomenal for LIC’s growth, and it stands tall in the insurance industry with a huge market share of over 73%. The claim settlement record of LIC is also exemplary. At a time when the government is facing a severe resource crunch because of dwindling tax collections, the divestment of LIC would amount to squandering away precious resources for the benefit of the corporate houses.
The LIC has recently paid a dividend of ₹2,611 crores to the government of India against initial equity of ₹100 crores. The LIC also has the proud distinction of contributing more than 25% to the total budgetary efforts of the government of India and selling part of its stake to private interests and its divestment would be the surest blow to the resource mobilization efforts.
Divestment of LIC is not just the only flaw of the 2020 annual budget. Increased customs duty on shoes and furniture also adds itself to the list. The government has taken a major step towards headline management by cutting the individual tax. The following headline management step was taken to drag the attention of the citizens from education and health budget as there was nothing much to offer in these sectors.
Share market witnessed the fall of Nifty to 300 points and Sensex to 700 points, and it clearly shows that share market and mutual fund investors are unhappy with the budget. The reason behind this is the removal of dividend distribution tax as it will result in a burden on the stakeholders of a company.
The government seems disinterested in increasing the farmer income as there was just a slight increase in agriculture and rural development allocation. Previously, the allocation was 2.63 lakh crore, and now it is increased to just 2.83 lakh crore.
The funniest part of the budget was the government prediction of nominal GDP growth for the next financial year. The government predicted the growth rate at 10 per cent, and this prediction is free of cost content to the political satirist and comedians.