How India’s life insurance sector funds government expenditure

When the government borrows, the question that follows is rarely asked aloud: who lends? A large part of the answer is the life insurance sector. Every year, millions of households across India pay premiums into life insurance policies. That money is reinvested, for decades, in the very securities that finance government expenditure — roads, railways, water supplies, hospitals, defence. The household protecting itself against the loss of its breadwinner is simultaneously, and unknowingly, lending to the sovereign [the Central government]. Life insurers collectively hold close to a quarter of India’s outstanding central government dated securities, based on RBI and IRDAI data — a share that has remained stable even as the total sovereign debt stock expanded by around 40 per cent in three years. This is not a number that appears in budget speeches or parliamentary debates. It is, however, a number that matters.