New Delhi, Jan 20 (PTI) Moody's Ratings on Monday projected the Indian economy to grow by 7 per cent 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.

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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.

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"We expect India's economy to grow by 7 per cent in FY 2024 (year to March 2025), down slightly from 8.2 per cent the previous year. India's GDP per capita at purchasing power parity is also growing, up 11 per cent year on year to USD 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 per cent 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 per cent in the first eight months of 2024, outpacing the 8 per cent 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 per cent in FY 2025 (2025-26).

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

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

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

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)