Today, India aspires to become a $5 trillion economy by 2027; for us to realise this dream there are a few major points that should be addressed. Let us imagine our economy as a bucket, which is being constantly filled with water, however, the bucket also has a few holes that keep draining out the water. We have to ensure that these holes are properly sealed else they will continue to deplete the bucket. We have identified four major areas that are acting as roadblocks to the economic prosperity of our country, these areas are:-
· Weak health infrastructure
· Damages from Natural Calamities
· The climate changes affecting agriculture
We feel that this Budget and the upcoming few Budgets should aim to address these issues. Let us expand on these issues and their possible solutions.
Weak health infrastructure – India suffers from a huge Health Protection Gap (HPG); nearly 30 per cent of Indians or about more than 40 Crore Indians have no health insurance. This segment of the population predominantly comprises people who are self-employed and are working in informal or semi-formal sectors. We require low-cost, comprehensive health insurance products to cater to this ‘missing middle.’ Health insurance at a government-tender rate should be available for all, and the union Budget should have a provision for the same. This tender rate should be extended to all employers/companies to enable them to buy insurance for their employees. Employee insurance should be made mandatory to ensure that more and more citizens are covered under the protection of health insurance.
Damages from Natural Calamities – India is witnessing a staggering rise in natural calamities like earthquakes, landslides, and floods. Without dwelling on too many details, only one simple data will highlight the rising frequency of NAT CAT events; we witnessed roughly 765 NAT CAT events since 1900; between 2001-2021 total number of such events stands at about 354. Apart from the rising frequency of natural calamities, there also lies a wide protection gap between insured v economic losses. The protection gap is more than 90 per cent. Eventually, the government has to direct huge sums of money as relief measures after such events. Parametric insurance (Index-Based Solution) will work as an effective tool to bridge the protection gap. A provision to launch parametric insurance should be made in the upcoming Budget. The government can finance Parametric Insurance through a cess while collecting property tax.
The climate changes affecting agriculture – The other point is the impact of climate change on agriculture; the sector ascribes to about 14 per cent of India’s economy and offers huge employment of around 42 per cent. Climate change has a huge impact on agriculture; over 5 million hectares of crops were lost due to rain in 2021 alone. The ongoing PM-FBY scheme has already helped in bringing down farmer suicide rates; however, up till now only approx. 25 per cent of the total cultivated area is insured under PMFBY. Our aim should be to bring the remaining 75 per cent of land and non-loaned farmers under the ambit of insurance so that the farmer’s suicide comes down to zero. We propose designing Pradhan Mantri – Kisan Aarogya Bima, in which every farmer should be enrolled under Agri Insurance clubbed with a health plan for farmers.
Pandemic – We have recently witnessed how much impact a pandemic can have on the economic growth of a country. We lost roughly 52.6 lakh crore in 3 years to the pandemic; this is about 12 per cent of our GDP. The next pandemic is likely to surface sooner than we envisage, and we must be prepared to battle it. We should develop an Indian Pandemic Risk Pool that can be utilized to provide relief to the informal and low-income sectors of society during the pandemic. The pool can also be utilized to protect the businesses against the loss of profit for the period that they might have to shut down, as limitations of movements and lockdowns adversely impact businesses. This pool can be announced during the union Budget.
Pandemic risk is too big a risk to be undertaken by only the public or private insurance sector or governments. The risk should be shared between public, and private insurers along with the central and state governments.
The insurance industry is going to play an instrumental role in making India a $5 trillion economy as it will help insulate the economy from various risks and losses. If the aforementioned points are addressed well in the upcoming Budgets and the risks are managed effectively, there is no reason why we cannot accomplish our dream much earlier than 2027. Once the leakages in the buckets are sealed then our economy will only continue to grow as we will be able to utilize our resources to build a stronger infrastructure and boost our growth.
Views are personal. The author is MD & CEO, Bajaj Allianz General Insurance
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