annual report 2008-09 - IRDA

ANNUAL REPORT 2008-09
September 2008, because of the limited exposure to
the troubled assets and prudential policies put in place
by the RBI. The call / notice money market exhibited
orderly conditions during the first half of 2008-09,
during which period the call rate remained largely
within informal corridor of the repo and reverse repo
rates. The pressure on the money markets was
observed in the beginning of the third quarter of 2008-
09. The average call rate for 2008-09 was 7.06 per
cent as against 6.07 per cent in the previous year.
The global financial crises adversely affected the
primary equity and debt markets also. Resource
mobilization through public issues, private placements,
euro issues and mutual funds witnessed a sharp
decline due to uncertain conditions in the secondary
market. The number of new equity issues has sharply
declined from 116 in 2007-08 to 45 in 2008-09.
In the secondary market, the market capitalization in
the BSE sensex contracted sharply by nearly 40 per
cent by end March 2009. The BSE sensex fell to a
low of 8160 on March 9, 2009 a decline of 61 per cent
from the peak of January 8, 2008. Market
capitalization to GDP ratio has almost became half
from 108.8 per cent to 58 per cent by end March 2009.
Number of schemes and net resource mobilization
by mutual funds declined significantly during 2008-
09 compared to the previous year. Substantial
outflows were recorded by mutual funds and the net
assets managed by mutual funds declined by 17.4
per cent during 2008-09. The yields in the secondary
market for government securities hardened on
account of inflationary expectations by the beginning
of 2008-09. By mid September 2008 the yields have
eased.
During 2008-09, growth of India’s merchandise
exports has sharply decelerated to 3.4 per cent from
20.9 per cent recorded in the previous year. Similarly,
imports growth also decelerated to 14.3 per cent in
2008-09 from 35.5 per cent a year ago. India’s current
account deficit, which averaged 1.0 to 1.5 per cent of
GDP during 2005-06 to 2007-08, has gone up to 2.6
per cent in 2008-09. In dollar terms, it has gone up to
USD 119.1 billion from USD 88.5 billion in 2007-08.
During 2008-09, foreign investment in India was mainly
driven by buoyant FDI inflows; however, there was
large portfolio outflow on account of de-leveraging
triggered by the financial crisis. FDI was mainly
channeled into the manufacturing sector.
The Indian rupee exhibited two-way movements
during 2008-09 against the US Dollar. During 2008-
09, the widening of current account deficit coupled
with net capital outflows resulted in the drawdown of
foreign exchange reserves of USD 20.1 billion
(excluding valuation) as against accretion to reserves
of USD 92.2 billion in 2007-08. Taking into account
the valuation losses of USD 37.7 billion arising out of
depreciation of major currencies against the US dollar,
India’s foreign exchange reserves recorded a decline
of USD 57.7 billion during 2008-09 to USD 252.0 billion
as at end-March 2009. Despite the drawdown during
the crisis, India’s foreign exchange reserves, however,
remains at a comfortable level.
B APPRAISAL OF INSURANCE MARKET
TABLE 1
KEY MARKET INDICATORS
Total Premium
(Life and non-life)
Life
Non-Life
World premium *
(Life and Non-life)
Life
Non-Life
Geographical restriction
for new players
Equity restriction
Registration restriction
Rs.252143.10 crore
Rs.221791.26 crore
Rs.30351.84 crore
USD 4270 billion
USD 2491 billion
USD 1779 billion
None
Foreign promoter can
hold up to 26 per cent of
the equity
Composite registration
not available
Source: * Swiss Re, (figures pertain to calendar year 2008)
Rest of the figures for the finanical year 2008-09
Registered insurers in India
By end March 2009, there were forty-four insurance
companies operating in India; of which twenty-two
were in the life insurance business and the remaining
twenty-one were in general insurance business and
one national re-insurer.
Of these forty-four companies, 8 are in the public
sector (two specialised insurers, namely ECGC and
AIC, one in life insurance, four in general insurance
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