By Vibha Padalkar
Macro financial: India’s GDP shrunk by 23.9% and 7.5% respectively, in the 1st two quarters of FY20-21 due to the pandemic. Improvement across important financial indicators and Phase 1 of India’s Covid-19 vaccination programme has set expectations about a V-shaped recovery in GDP development to 8-11% in FY22.
Insurance Industry: India nevertheless remains vastly below-insured with a penetration of only 2.8% as compared from 6-18.3% for Asian nations such as Singapore, Japan, Taiwan and Hong Kong. India’s pension marketplace is below-penetrated at 4.8% of GDP.
India’s insurable population (20 to 64 years) is anticipated to rise to 61% of the total anticipated population of 1.6 billion by 2035 as compared to 56% of total population of 1.3 billion in 2015. Also, India’s elderly population is anticipated to double by 2035 and triple by 2050 as compared to 78 million in 2015.
The insurance coverage sector in India has noticed steady development in the final decade. Demographic aspects such as a developing insurable population, shift away from joint loved ones method, escalating trend of borrowing for consumption and developing awareness of the require for saving, protection and retirement arranging tends to make this a multi decade chance. The Indian Life insurance coverage marketplace grew by 12% in FY20 in terms of total gross premium to attain a worth of `5.7 trillion.
Budget Analysis: The Union Budget 2021-22 is focused on revival of financial development and requires cognizance of the require for greater allocation for Covid-19 vaccine improvement and distribution. The expansionary nature of the Budget was the require of the hour and comes along with a roadmap for fiscal consolidation. Higher allocation to capital expenditure ought to assistance development revival and job creation. FDI improve in insurance coverage, continuation of the disinvestment programme and ease of tax compliance are welcome methods. All in all, the Budget addresses important problems facing the Indian economy and does the balancing act necessary in these uncommon occasions.
The Budget has two proposals for the insurance coverage sector:
Higher FDI: Proposed FDI limit improve from 49% to 74% with foreign ownership and manage with safeguards would provide flexibility in shareholding structure exactly where insurers are not just dependent on domestic capital to expand their company. Potential added benefits could involve introduction of technologies/ greatest practices and worldwide encounter to the extent not currently present in India.
Change in 10 (10D) advantage for higher ticket size ULIP policies: ULIPs issued on or following February 1, 2021, with an aggregate annual premium of more than `2.5 lakhs would not be entitled for exemption below section 10 (10D) of the Income-tax Act, 1961. This would place higher ticket size policies on par with equity mutual funds.
While the item category continues to be appealing for consumers, influence on company for insurance coverage firms would rely on their item mix and typical ticket size. Death advantage continues to be exempt below section 10 (10D) of the Income-tax Act, 1961.
The author is MD & CEO, HDFC Life