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The Indian insurance sector will see growth rebounding in 2021 lead by growth in the health and protection segments, according to a report by Moody’s Investors Service.

Mohammed Ali Riyazuddin Londe, Vice President-Senior Analyst, Financial Institutions, Moody’s Investors Service told Moneycontrol in an interaction that this is not a one-off growth as far as health insurance is concerned.

He added that the health insurance sales saw a spike in 2020 due to a rise in awareness amidst the Coronavirus outbreak. He said that this will see general insurers growth to move to positive territory in 2021.

“We expect health premiums to continue growing strongly into 2021, when we anticipate that India's GDP growth will rebound to 10.8 percent, leading to a gradual normalisation of economic activity,” he added.

The Moody’s report said that India's low rate of insurance penetration (premiums as a percentage of GDP) indicates that there is ample scope for continued premium growth. The overall insurance penetration rate stood at 3.8 percent in 2018, low compared with developed markets such as the UK (10.3 percent) and the US (11.4 percent), and also below large developing markets such as China (4.3 percent).

Economic performance hit affects insurers

Moody’s said that India's economic performance is increasingly weak. The report expects real GDP to contract by 10.6 percent in the fiscal year starting April 2020, compared with our previous forecast of a 4 percent contraction.

Londe explained that the economic slump had an adverse impact on the Indian insurance industry’s premiums.

In the April to December 2020 period, premium growth slowed to 2.5 percent in general insurance, while life insurance new business premiums fell by 1.7 percent. This compares with growth of 11.7 percent and 20.6 percent for general and life insurance premiums respectively in the previous fiscal.

However, he added that the sustained strong demand for health insurance has slowed the decline. Health premiums rose 13.7 percent in the April to December 2020 period. This was in line with the 13.4 percent growth in the previous fiscal.

The Moody’s report said that persistently strong sales of health insurance reflect rising consumer awareness of the product as a result of the coronavirus pandemic, combined with insurers' efforts to develop their digital sales channels.

Moneycontrol had reported how health insurance overtook motor insurance as the largest business segment among non-life insurers.

Solvency pressures may aid M&A, capital infusion

Some Indian insurers’ solvency remains inadequate due to weak profitability, resulting from the intense competition in the market as per the Moody’s report.

Londe explained that the general insurance sector's profitability has been under particular pressure, with a combined ratio of 117.6 percent.

While positive investment results have previously helped compensate for a weak underwriting performance, falling yields have reduced this source of support, he explained.

The government also took steps to ensure that state-run insurers are giving a helping hand to boost their profitability.

On July 8, the Union Cabinet chaired by Prime Minister Narendra Modi called off a 2018 Budget proposal to merge three state-owned general insurers, National Insurance, Oriental Insurance and United India Insurance.

Instead, the government approved a capital infusion for an overall value of Rs 12,450 crore (including Rs. 2,500 crore infused in FY20) in the three insurers.

“We see the capital injection as credit positive as it will allow the insurers to enhance their risk-based pricing and underwriting discipline, helping them generate organic capital growth and attract foreign reinsurance coverage. Given the capital increase is happening for state-run insurers, their focus on underwriting discipline and risk-based pricing will trickle down and benefit the wider market,” he added.

In the private sector, he explained that profitability and solvency concerns are driving M&A.

"Capital raising must be accompanied by an increased focus on writing profitable business to put these companies on a sound financial footing in the long term," he said.

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The Indian insurance sector will see growth rebounding in 2021 lead by growth in the health and protection segments, according to a report by Moody’s Investors Service.

Mohammed Ali Riyazuddin Londe, Vice President-Senior Analyst, Financial Institutions, Moody’s Investors Service told Moneycontrol in an interaction that this is not a one-off growth as far as health insurance is concerned.

He added that the health insurance sales saw a spike in 2020 due to a rise in awareness amidst the Coronavirus outbreak. He said that this will see general insurers growth to move to positive territory in 2021.

“We expect health premiums to continue growing strongly into 2021, when we anticipate that India's GDP growth will rebound to 10.8 percent, leading to a gradual normalisation of economic activity,” he added.

The Moody’s report said that India's low rate of insurance penetration (premiums as a percentage of GDP) indicates that there is ample scope for continued premium growth. The overall insurance penetration rate stood at 3.8 percent in 2018, low compared with developed markets such as the UK (10.3 percent) and the US (11.4 percent), and also below large developing markets such as China (4.3 percent).

Economic performance hit affects insurers

Moody’s said that India's economic performance is increasingly weak. The report expects real GDP to contract by 10.6 percent in the fiscal year starting April 2020, compared with our previous forecast of a 4 percent contraction.

Londe explained that the economic slump had an adverse impact on the Indian insurance industry’s premiums.

In the April to December 2020 period, premium growth slowed to 2.5 percent in general insurance, while life insurance new business premiums fell by 1.7 percent. This compares with growth of 11.7 percent and 20.6 percent for general and life insurance premiums respectively in the previous fiscal.

However, he added that the sustained strong demand for health insurance has slowed the decline. Health premiums rose 13.7 percent in the April to December 2020 period. This was in line with the 13.4 percent growth in the previous fiscal.

The Moody’s report said that persistently strong sales of health insurance reflect rising consumer awareness of the product as a result of the coronavirus pandemic, combined with insurers' efforts to develop their digital sales channels.

Moneycontrol had reported how health insurance overtook motor insurance as the largest business segment among non-life insurers.

Solvency pressures may aid M&A, capital infusion

Some Indian insurers’ solvency remains inadequate due to weak profitability, resulting from the intense competition in the market as per the Moody’s report.

Londe explained that the general insurance sector's profitability has been under particular pressure, with a combined ratio of 117.6 percent.

While positive investment results have previously helped compensate for a weak underwriting performance, falling yields have reduced this source of support, he explained.

The government also took steps to ensure that state-run insurers are giving a helping hand to boost their profitability.

On July 8, the Union Cabinet chaired by Prime Minister Narendra Modi called off a 2018 Budget proposal to merge three state-owned general insurers, National Insurance, Oriental Insurance and United India Insurance.

Instead, the government approved a capital infusion for an overall value of Rs 12,450 crore (including Rs. 2,500 crore infused in FY20) in the three insurers.

“We see the capital injection as credit positive as it will allow the insurers to enhance their risk-based pricing and underwriting discipline, helping them generate organic capital growth and attract foreign reinsurance coverage. Given the capital increase is happening for state-run insurers, their focus on underwriting discipline and risk-based pricing will trickle down and benefit the wider market,” he added.

In the private sector, he explained that profitability and solvency concerns are driving M&A.

"Capital raising must be accompanied by an increased focus on writing profitable business to put these companies on a sound financial footing in the long term," he said.

The risk-based capital regime that could be introduced in India in the next two years may also lead to some shake-up in the industry. Risk-based capital refers to holding according to the business written by individual insurers and their allied risks.

"The shift to a risk-based capital regime usually brings some shock to the industry in the short term but market will benefit in the longer term. Here, smaller insurance players may face pressure and may look at merger or consolidation in some way," he added.

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Petrol price on Tuesday breached the Rs 85 a litre mark in the national capital and diesel neared record high after rates were raised for the second consecutive day.

Petrol and diesel prices were hiked by 25 paise per litre each, according to a price notification from oil marketing companies.

This took the petrol price in Delhi to Rs 85.20 per litre and to Rs 91.80 in Mumbai.

Diesel rate climbed to Rs 75.38 a litre in the national capital - just shying away from its record high - and to an all-time high of Rs 82.13 in Mumbai, the price data showed.

Petrol and diesel prices were hiked by 25 paise per litre each on Monday as well.

While petrol and diesel prices are at a record high in Mumbai, petrol price in the national capital is at an all-time high. Diesel price is just short of Rs 75.45 a litre record touched on October 4, 2018.

State-owned fuel retailers -- Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) -- had on January 6 resumed daily price revision after nearly a month-long hiatus.

Since then rates have gone up by Rs 1.49 a litre on petrol and Rs 1.51 in case of diesel.

This comes after international oil prices firmed up on hopes of demand returning from the rollout of coronavirus vaccines in different countries, including India.

When fuel prices had last touched record high on October 4, 2018, the government had cut excise duty on petrol and diesel by Rs 1.50 per litre in a bid to ease inflationary pressure and boost consumer confidence. Alongside, state-owned fuel retailers cut prices by another Re 1 a litre, which they recouped later.

This time, there are no indications of a duty cut so far.Petrol and diesel prices are revised on a daily basis in line with benchmark international price and foreign exchange rates. They vary from state to state depending on the incidence of local taxes.

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The country’s sugar output rose by 31 percent to 142.70 lakh tonnes in the first three-and-a-half months of the 2020-21 marketing year that started in October 2020, industry body ISMA said on Monday.

Sugar production in India, the world’s second-largest sugar-producing country, stood at 108.94 lakh tonnes till January 15 of the 2019-20 marketing year (October-September).

Indian Sugar Mills Association (ISMA) has projected the sugar output to increase by 13 percent to 310 lakh tonnes in the 2020-21 marketing year on likely higher availability of sugarcane as against 274.2 lakh tonnes last year.

Releasing the latest production update, ISMA said the country’s sugar output is higher by 33.76 lakh tonne so far this year as compared to last year’s production for the corresponding period.

As many as 487 sugar mills were in operation as against 440 in the said period, it said.

Sugar production in Uttar Pradesh, the country’s leading sugar producing state, remained slightly lower at 42.99 lakh tonnes till January 15 of this marketing year, as against 43.78 lakh tonne in the year-ago period because of reportedly lower cane yield and lower sugar recoveries in the state.

The output in Maharashtra, the country’s second-largest sugar-producing state, rose to 51.55 lakh tonne from 25.51 lakh tonne in the said period.

Similarly, the production in Karnataka, the country’s third-largest sugar-producing state, increased to 29.80 lakh tonne till January 15 of this year from 21.90 lakh tonne in the year-ago period.

Production reached 4.40 lakh tonne in Gujarat, 1.15 lakh tonne in Tamil Nadu, while remaining states of Andhra Pradesh & Telangana, Bihar, Uttarakhand, Punjab, Haryana and Madhya Pradesh, Chhattisgarh, Rajasthan, Odisha have collectively produced 12.81 lakh tonne of sugar till January 15 of this year, ISMA said in a statement.

On ethanol, ISMA said oil marketing companies (OMCs) have allocated about 309.81 crore litres for 2020-21 marketing year, including about 39.36 crore litres from damaged food grains and surplus rice.

This would enable ethanol-petrol blending of 7-8 per cent, depending on the total fuel demand.

However, some states like Uttar Pradesh, Maharashtra, Karnataka, Delhi, Punjab, Haryana and Uttarakhand have already achieved blending percentage of 9-10 percent on January 11.

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Union Finance Minister Nirmala Sitharaman is set to present the Union Budget 2021-22 on February 1.

The COVID-19 pandemic had ravaged all the sectors, but it is the micro small and medium enterprises (MSME) sector, which is said to have borne the maximum brunt of the pandemic.

As a result of the pandemic-induced lockdown, the MSME sector has been facing a massive liquidity and supply crunch, shortage of labour and non-payment of dues.

The government had announced a Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs under the Aatmanirbhar Bharat Abhiyan package in order to mitigate the stress caused by the lockdown. The scheme was valid till the month of October.

Finance Minister Sitharaman had later extended the ECLGS till November 2020 and had further extended it till March 21, 2021.

Experts, however, feel the Centre should take more steps for the revival of the MSME sector.

Financial Express had reported that experts have said the government should lower the GST on professional services from 18 percent to 5 percent to boost the MSME sector. 

MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME) has sought the temporary suspension of the Basel norms to ease lending from the banking sector, Financial Express had reported.

Further, the experts also want the government to increase the collateral-free loan limit to Rs 5 crore for micro-units, Rs 15 crore for small businesses and Rs 35 crore in case of medium businesses.

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The Union cabinet is most likely to consider the proposal of mining sector reform for enhancing private investment, in the meeting scheduled for January 13.

Amendments in the Mines and Minerals (Development and Regulation) Act, 1957 have been proposed, sources said.

Earlier on Monday, Union Home Minister Amit Shah said coal sector will play a very important role in achieving the target of $5 trillion economy by 2022.

He even launched a single window clearance system for the coal sector, and stated that commercial coal mining auctions will now facilitate small and medium industries to receive coal supplies easily.

Prior to this, Mines Secretary Anil Kumar Jain had indicated that reforms will pave the way for auctioning of at least 500 mineral blocks and had emphasised that calendar year 2021 will be a "bridge year between the past and the future".

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India in 2020 has been one of the biggest and fastest-growing technology markets in the world. Digital and technology adoption in India has been increasing at a steady rate over the last few years, and the current COVID-19 pandemic has accelerated the rate of technology adoption across sectors, including in high involvement services such as education and healthcare.

From the consumer perspective, there is a behavioural shift in using digital as the primary channel, even for high velocity everyday purchases. Domestic and global investors are actively participating in building digital infrastructure — communication networks, data centre and cloud services, and electronics manufacturing — to support India’s fast-growing digital economy.

Specifically, 2020 has been a breakout year for the electronics manufacturing industry. Government incentives such as Production Linked Incentives (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) under the aegis of ‘Atmanirbhar Bharat’ generated significant interest from global investors in setting up manufacturing and supply chains in India. In October, the government approved applications of 16 electronics companies under the PLI scheme, and the scheme is now also being extended to 10 other sectors, including telecom and networking components.

A strong manufacturing ecosystem complements scientific and industrial research, and the developments in the electronics manufacturing industry in 2020 are likely to boost the overall technology manufacturing in India in the years to come. This will enable a self-sustaining ecosystem for research & development in advanced technologies, leveraging India’s cost-effective science and engineering talent.

In the export markets, India’s tier-1 technology services companies have shown resilience in not only revenue performance, but also in margin performance during this pandemic, and also stepped up hiring activity during the year. There has also been significant interest from tier-1 and tier-2 technology services companies to establish strategic partnerships with their MNC clients with respect to their captive technology and business operations, including acquisition and business transfer of certain assets.

For the MNCs, exiting sub-scale captive operations through strategic sale and business transfer helps unlock value, while ensuring business continuity. For service providers, such deals tend to strengthen client relationships and also provide revenue stability in the medium term along with skilled employees and capabilities. This year witnessed a few strategic transactions of this nature, and this trend is likely to continue into the future, as MNCs streamline their global product development and service delivery strategies in the post COVID-19 world.

From the demand side, digital transformation deals continue to gain momentum as enterprises invest in cloud based infrastructure for digitising their customer channels and business operations. Technologies such as artificial intelligence and edge computing are gaining momentum in designing next generation cloud-to-edge architecture and services. Workforce transformation in a work-from-anywhere environment has witnessed significant developments during the year, and also fundamentally transformed the way global delivery models are executed.

As we look into the future, global delivery models in technology services industry could witness a significant redesign, in the technology enabled world of work. Client project delivery would shift from mobilising resources to mobilising skills in a fully distributed workforce spread across multiple geographies, collaborating seamlessly for client projects delivered using cloud-based environments.

COVID-19 has brought significant shifts in technology consumption for enterprises, governments, and consumers alike, and 2020 has been the inflexion point in that transformation journey. As we look into the future, mass digitisation is a reality, across sectors and across the world, and a range of enterprise and consumer technologies — from 5G to the cloud to virtual reality and edge computing — will continue to offer opportunities to global enterprises. There is greater market potential, shorter adoption cycles, and possibly lower costs for next generation tools and technologies, and it’s imperative for organisations to reimagine customer experience and business processes for a digital first world.

Workforce transformation has proved to be one of the significant developments across industries. What started out as necessity in 2020 is likely to find a new equilibrium in 2021, as organisations reimagine workforce and workplaces at a more fundamental level keeping in mind long-term transitions in their business. Successful organisations will be those that are able to redesign their approach towards workforce management, in attracting, engaging, and retaining talent in a wholly different, technologically-enabled world of work.

The learnings on workforce transformation from the technology industry, which is one of the earliest to adapt to this phenomena would have relevance and resonance across the broader knowledge industries. The Indian technology industry’s talent machine coupled with fully distributed global delivery models is likely to play an important role in the transformation journey of the global digital economy in the years to come.

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Disruptions caused by the COVID-19 pandemic continued to impact cargo movement in India with thermal coal imports at 12 major ports declining 16.43 percent year-on-year to 55.16 million tonnes (MT) in April-December 2020 period, according to ports' body IPA.

Coking coal handling dropped by 12.13 percent to 36.96MT during the April-December period of the current fiscal.

Coal volumes at the 12 major ports declined for the ninth straight month in December 2020, as per the Indian Ports Association (IPA).

These ports had handled 66MT of thermal coal and 42MT of coking coal in April-December period of the previous financial year.

Thermal coal is the mainstay of India's energy programme as 70 percent of power generation is dependent on the dry fuel while coking coal is used mainly for making steel.

India is the third-largest producer of coal after China and the US. It has 299 billion tonnes of resources and 123 billion tonnes of proven reserves, which may last for over 100 years.

In the wake of the pandemic, sharp declines were also witnessed in handling of containers, coal and POL (Petroleum, Oil and Lubricant), among other commodities.

India has 12 major ports under the control of the central government -- Deendayal (erstwhile Kandla), Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), V O Chidambarnar, Visakhapatnam, Paradip and Kolkata (including Haldia).

These ports handle about 61 percent of the country's total cargo traffic. They handled 705MT of cargo last fiscal.

Adversely impacted by the pandemic, these 12 ports witnessed a considerable decline in cargo traffic for the eighth straight month in November.

Recently, Shipping Minister Mansukh Mandaviya said the cargo traffic at 12 major ports declined considerably from March 2020 onwards due to the adverse impact of the pandemic.

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The government has not banned the export of COVID-19 vaccines, said Union Health Secretary Rajesh Bhushan on January 5.

The Ministry of Health, Ministry of Commerce and Industry, Department of Promotion of Industry and Internal Trade (DPITT) or the Directorate General of Foreign Trade (DGFT) have not made any changes to export rules, thus, vaccine exports are allowed.

On January 4, the head of Serum Institute of India, which has been contracted to produce 1 billion doses of the vaccine for developing nations said India will not allow the export of the Oxford University-AstraZeneca coronavirus vaccine for several months.

He said the company also has been barred from selling the vaccine in the private market.

The vaccine was granted emergency use authorization by the Indian regulator on January 3, but on the condition that SII doesn't export the shots to ensure that vulnerable populations in India are protected, Adar Poonawalla, the company's CEO, said in a phone interview with The Associated Press.

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Under the Trump administration, US-India tensions have increased over each side's tariff policies, a Congressional report has said, noting that the two sides have also held concerted negotiations to address these trade frictions.

The bipartisan Congressional Research Service (CRS), in its latest report, pointed out that India's recent tariff hikes on cell phones and other telecommunication goods went up from zero percent to 15-20 percent in the last few years.

"Under the Trump administration, bilateral tensions increased over each side's tariff policies. In general, India has relatively high average tariff rates, especially in agriculture. It can raise its applied rates to bound rates without violating its commitments under the WTO (World Trade Organization), causing uncertainty for US exporters," said the CRS report, which is prepared for the members of Congress ahead of trade decisions.

The United States and several other countries have requested to join various WTO dispute consultations against India, related to its technology tariffs, also questioning its compliance with the WTO Information Technology Agreement (ITA).

"India opposes the 25 percent steel and 10 percent aluminum national security-based 'Section 232' tariffs that the Trump Administration imposed in 2018. India repeatedly delayed applying planned retaliatory tariffs against the United States in hopes of resolving the issues bilaterally," it said.

After India lost its eligibility for the US Trade Preference Program, India imposed higher tariffs of 10 percent to 25 percent, affecting about USD 1.32 billion of US exports, such as nuts, apples, chemicals, and steel, the report stated, adding that the two sides are challenging each other's tariffs in the WTO.

"Under the Trump administration, the United States and India held concerted negotiations to address trade frictions. A potential trade deal could include partial restoration by the United States of India's GSP (Generalised System of Preference) benefits in exchange for certain market access commitments according to press accounts," CRS said.

Yet, the long expected limited trade deal has not materialised to date, the report said.

Negotiations under prior administrations on a Bilateral Investment Treaty (BIT) are stalled due to differences on approaches on investor protection.

On the government-to-government trade policy, the CRS listed a set of key issues. Main among them was what aspects of bilateral trade relations would change or remain the same under a President-elect Joe Biden-led administration.

President Donald Trump, a Republican, is set to be succeeded by Biden, a Democrat on January 20 after he won the November 3 presidential election.

Other key issues were, what trade issues should the United States and India prioritise in future talks, the potential for broader trade agreement negotiations, will India and the United States renegotiate entry into the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), or potentially seek other ways to engage on regional issues, and are there opportunities for the United States and India to bridge differences on multilateral trade issues.

Noting that India and the US have signed defense contracts worth more than USD 20 billion since 2008, up from USD 500 million in all previous years combined, the CRS said the future big deals are the purchase of an Integrated Air Defense Weapon System, valued at nearly USD2 billion, and 30 MQ-9B Sky Guardian drones worth more than USD 3 billion.

"India is eager for more technology-sharing and co-production initiatives, while the United States urges more reforms in India's defence offsets policy and higher Foreign Direct Investment caps in its defence sector. India's multibillion-dollar deal to purchase the Russian-made S-400 air defense system may trigger US sanctions on India under the Countering America's Adversaries Through Sanctions Act, the CRS said.