India is one of the fastest-growing insurance markets in the world and is expected to emerge as one of the top six insurance markets by 2032, according to the Economic Survey 2022-23 that was presented in the Parliament on Tuesday.

Digitisation of India's insurance market, accompanied by an increase in FDI limit for insurance companies, is likely to facilitate an increased flow of long-term capital, a global technology, processes, and international best practices, which will support the growth of India's insurance sector.

Also, as we move to a high middle-income economy, India's pension sector has tremendous scope for growth. Government initiatives towards enhancing pension literacy of subscribers and intermediaries, and a nudge from the regulator and the government to encourage young adults to join the pension scheme would play a significant role in enhancing pension availability to a more extensive section of the society, the Economic Survey said.

The increasing outreach of the banking sector and capital markets is reflected in the insurance and pension sectors. Insurance penetration in India has been steadily increasing, with life insurance penetration being above the emerging markets and global averages.

Important government interventions and a conducive regulatory environment have supported the growth of the insurance market, which has seen increasing partnerships, product innovations, and vibrant distribution channels.

The pension sector too has been taking rapid strides since the introduction of the National Pension Scheme (NPS), more recently, the Atal Pension Yojana (APY). The sector has witnessed a robust increase in the number of subscribers and assets under management (AuM), the Survey said.

The expansion of the sector has been aided by government measures such as relaxation in CCS (Pension) Rules, integration of electronic Pension Payment Order (e-PPO) with DigiLocker, and relaxation in the timeline for submitting Digital Life Certificate.

As global central banks reaffirm their hawkish stances and telegraph 'higher-for-longer' policy rates in their battle against inflation, monetary conditions are expected to remain tight worldwide.

Domestically, however, RBI's support to growth will ensure adequate liquidity in the financial markets. The growth in credit offtake is expected to sustain, and combined with a pick-up in private Capex, will usher in a virtuous investment cycle.

The credit upcycle will also be aided by constant monitoring of the risks in the financial system by the regulators and their efforts to contain them. Strong macroeconomic fundamentals will underpin the return of global capital flows to India once the fog of uncertainty lifts, the Survey said.