Indian economy to grow 7% in FY25, robust expansion to drive insurance premium growth, says Moody's

Moody's Ratings on Monday projected the Indian economy to grow by 7% in the current fiscal and said robust economic expansion will drive growth in insurance premiums.

Moody's expects Indian insurers to benefit from sustained premium growth, helped by India’s robust economic expansion and rising demand for health insurance.

Higher premium income, driven also by an anticipated rise in prices as the government reforms the country’s dominant state-owned insurance sector, will improve the industry's currently weak profitability.

India’s private sector insurers continue to reinforce their solvency, but we expect some pressure on their capital adequacy because of increased underwriting exposure and regulatory changes, Moody's said.

"We expect India's economy to grow by 7% in FY 2024 (year to March 2025), down slightly from 8.2% the previous year. India’s GDP per capita at purchasing power parity is also growing, up 11% year on year to $10,233 in FY2023," Moody's said.

As per National Statistics Office's (NSO) first Advance Estimates, the Indian economy is estimated to grow 6.4% in the current fiscal ending March 2025.

Higher average incomes coupled with consumers' increased risk awareness will support demand for insurance, particularly health cover.

Total premiums grew by 16% in the first eight months of 2024, outpacing the 8% expansion achieved in FY 2023. We expect continued premium increases to bolster Indian insurers' revenue.

Moody's expects India's GDP to grow by 6.6% in FY 2025 (2025-26).

India's insurance density (insurance premiums per capita) rose to $95 in FY 2023 from $92 in FY 2022, up from a historical average of below $80.

However, the country's overall insurance penetration rate (insurance premiums as a share of GDP) was just 3.7% in FY 2023, still far below-developed markets such as the UK (9.7%) and the US (11.9%).

This indicates that the Indian insurance industry still has ample growth potential, Moody's said.