Revitalizing Insurance and Healthcare: Key Recommendations for Budget 2025

SBI report urges focus on insurance penetration, healthcare funding, and GST reforms to ensure economic growth and social security.

New Delhi, January 25: As the Union Government prepares for Budget 2025, a State Bank of India (SBI) report has emphasized the urgent need for reforms in the insurance and healthcare sectors. It recommends measures such as tax exemptions on premiums, increased healthcare funding, and rationalized GST rates on medical devices to boost these critical sectors.

Insurance Sector: Addressing Declining Penetration

The SBI report highlighted that India’s insurance penetration dropped to 3.7% in FY24 from 4% in FY23. Life insurance saw a sharper decline to 2.8%, while non-life insurance stagnated at 1%. This trend threatens the Insurance Regulatory and Development Authority of India’s (IRDAI) mission of “Insurance for All by 2047.”

Key recommendations include:

• GST and Tax Exemptions: Remove GST and taxes on term life and health insurance premiums to make policies more accessible.
• Separate Tax Deductions: Introduce a deduction of ₹25,000–₹50,000 for life and health insurance under both old and new tax regimes.
• Unified Pension Schemes: Integrate government-sponsored programs such as Atal Pension Yojana (APY) and Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM) into a single platform for better accessibility and efficiency.
• MSME Insurance: Create a specialized program offering social security to MSME employees and income protection for families, along with coverage for business losses due to unforeseen factors.

Healthcare: Increasing Public Spending

The report calls for an aggressive increase in public healthcare spending, proposing a budget allocation of 5% of GDP. This surpasses the National Health Policy 2017 target of 2.5% by 2025 and is deemed essential for meeting the needs of a growing, ageing population.

Proposed measures include:

• Healthcare Cess Utilization: Allocate proceeds from healthcare cess effectively to support public health programs.
• Tobacco and Sugary Products Taxation: Impose a 35% GST slab on these products to generate additional revenue for healthcare initiatives.
• GST Rationalization on Medical Devices: Standardize GST rates on medical devices at 5%–12%, replacing the current range of 5%–18%, to reduce costs and enhance efficiency.

Potential Economic and Social Benefits

These recommendations aim to strengthen India’s insurance and healthcare sectors, fostering economic growth and providing robust social security. By making essential services accessible and affordable, the government can lay the foundation for a healthier and more secure population.

As Budget 2025 approaches, the implementation of these reforms could significantly impact India’s journey toward inclusive economic development.