Contribution of Insurance Sector to Growth and Development of the Indian Economy

For economic development, investment are necessary, investments are made out of savings. Insurance Company is a major instrument for the mobilization of savings of people particularly from the middle and lower income groups. These savings are channelized into investment for economic growth. Insurance serves a number of valuable economic functions that are largely distinct from other types of financial intermediaries. According to the official estimates, Indian economy is expected to grow at 7.6% (+/0.25%) in the fiscal year 2012–2013. However, leading financial organizations and economic think-tanks expect Indian economy to grow slower than official projections. The economy of India is the tenth-largest in the world by nominal GDP and the third largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a member of BRICS. On a per capita income basis, India ranked 140th by nominal GDP and 129th by GDP (PPP) in 2011, according to the IMF. Fortunately, in the past few years, several interesting lines of research have begun to map the specific contributions of insurance to the economic growth process as well as to the well-being of the poor. The evidence suggests that insurance contributes materially to economic growth by improving the investment climate and promoting a more efficient mix of activities than would be undertaken in the absence of risk management instruments. This contribution is magnified by the complementary development of banking and other financial systems. Empirical studies suggest that nonlife insurance contributes to growth in countries at many different levels of development. Life insurance makes a substantial contribution to growth mostly in wealthier countries, since life insurance is typically a smaller part of the total insurance market in low income countries. Of course, even if the data did not support a strong causal role for insurance as an engine of overall aggregate growth of