New Delhi, Jan 19 (IANS) India’s economy will expand 7.3 per cent in the current fiscal year and stronger growth will boost household incomes and support rising demand for insurance, a report said on Monday. 

The report from global Credit rating agency Moody's Ratings said India’s insurance sector is set to see a shift from current weak profitability due to sustained premium growth on the back of robust economic expansion, increased digitisation, tax changes.

"We expect India's economy to grow by 7.3 per cent in FY 2025 (year to March 2026), up from 6.5 per cent the previous year. This will increase average incomes and support demand for insurance," the ratings agency said.

The planned reform of the dominant state-owned insurance sector will also fuel the shift in insurance sector. The premium revenue already rose 17 per cent to Rs 10.9 lakh crore in April–November 2025, driven by a 20 per cent increase in life new‑business premiums and a 14 per cent rise in health premiums.

The report highlighted the rise in acceleration relative to 2024-25, when premiums rose 7 per cent to Rs 11.9 lakh crore.

Moody’s noted that per‑capita GDP grew 8.2 per cent in FY2024–25 to $11,176, and said digitisation is widening distribution and access to insurance products in line with the regulator’s “Insurance for All” objective.

The rating agency noted government moves to improve state insurers’ profitability including a minority stake sale in LIC and proposed recapitalisations subject to improvement in underwriting performance.

Other proposed measures include the potential merger or privatisation of state-owned insurers.

The increase in the foreign investment cap in insurers to 100 per cent from 74 per cent should enhance their financial flexibility, the report noted.

The ratings agency had earlier said in a report that decrease in effective GST rates, however, could enhance private consumption and support India's economic growth.