India is witnessing early signs of sustained economic upswing, says Deepak Parekh

The country’s economy is seeing early signs of sustained recovery amid a volatile global environment, veteran banker Deepak Parekh said Monday. Speaking to HDFC Life shareholders at the 22nd Annual General Meeting, he said that domestic economic activity is picking up due to an increase in private consumption. “We remain optimistic about the resilience of the Indian economy, despite the high volatility in the global environment. We are now witnessing the first signs of a sustainable economic upturn,” said Parekh, chairman of the private life insurer. He said the high growth in non-oil and non-gold imports reflects strengthening domestic demand and that domestic economic activity is fueled by private consumption and rising discretionary spending.

According to him, the expected normal southwest monsoon this year is likely to support consumption in rural areas. “We remain vigilant about the implications of current geopolitical tensions, increased commodity prices, increasing external supply and demand disruptions, capital outflows, higher inflation in emerging economies and the withdrawal of monetary accommodation in developed countries,” Parekh said. Speaking about the life insurance industry, he said that despite the pandemic, life insurance company new business premiums rose 16 percent in FY22. However, insurance penetration and density levels in the country still remain much lower than the global average, he said, adding that with GDP per capita increasing, there is huge potential for continued sectoral growth.

The Covid-19 pandemic has raised awareness about life and health protection coverage, allowing life insurers to look forward to continued growth in the sector and increasing insurance penetration in the country, he said. Speaking of HDFC Life’s performance, Parekh said the insurer delivered strong business performance by successfully balancing growth, profitability and business quality. It maintained a new business market share of 21 percent and 7.7 percent in the private and general insurance market in the previous fiscal year, it said. In the previous fiscal year, the company was hit by higher Covid-related claims that rose to Rs 5,800 crore, compared to Rs 1,037 crore in FY21. The individual death rate settlement in FY22 was 98.7 percent, he said.

“Despite this significant increase, our commitment to protecting our policyholders has remained steadfast and we have handled 99.6 percent aggregate and 98.7 percent individual death claims,” said Parekh. Parekh said that with the acquisition and subsequent merger of Exide Life, HDFC Life will be able to strengthen its distribution reach, especially in South India. He said HDFC’s merger with HDFC Bank is underway and pending several regulatory approvals. After the merger, HDFC Bank will become the ultimate shareholder of HDFC Life.

As for enabling regulation, he said as part of the development and penetration working group, regulator Irdai has been asked to accept the recommendations in the Health Indemnity Committee report, which would allow life insurers to distribute health insurance plans. Another suggestion is to move to a risk-based capital framework that would help improve capital efficiency and facilitate better risk management for insurance companies. The authority has already made significant easing in the form of allowing use and file for selected products. These kinds of opportunities for the industry are expected to support the growth agenda even more firmly in the future, Parekh said.

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