MC EXCLUSIVE Little sympathy for insurers now, they should offer innovative products: Sanjeev Sanyal on GST exemption

I certainly don't think there is a case for protecting entrepreneurs who feel that they can sit and run family offices from Dubai, Sanyal said.

The government has "dramatically" opened up the market for insurers by exempting policy premiums from GST, Sanjeev Sanyal, Member, Economic Advisory Council to Prime Minister said, adding that they should now come up with more innovative products and there is “very little sympathy” one can have for them after the rate relief.

“I am sorry, but there is very little sympathy one can have for them. We have dramatically opened up the market for them (after the GST rate exemption), so it is up to them to now come up with some useful products that they can, that should be now available for consumers. So, rather than whine about this, what they should do is to come up with more innovative products, which are in sync with what the new expanded demand system will be," Sanyal told Moneycontrol in an exclusive interview.

Effective from September 22, all individual health and life insurance policy premiums will be exempt from GST, as against a tax rate of 18 percent that they attract currently.

Earlier this week, the Finance Ministry had directed all insurance companies, public and private, as well as representatives of the Insurance Regulatory and Development Authority of India (Irdai) to ensure tax cut benefits are passed on to insurance premium costs.

Watch the full interview with Sanjeev Sanyal right here.

India Inc Must Innovate

Sanyal also said that there is no pressure on the next-generation of entrepreneurs to innovate. "I certainly don't think there is a case for protecting entrepreneurs who feel that they can sit and run family offices from Dubai, for example. Why should we be protecting that? If you're on the shop floor here innovating, we are all in favour of it. But family offices from Dubai doesn't justify providing protection," Sanyal said.

"If you're not coming up with new products, if you're not using the space and domestic market created to go out there and capture markets abroad, that is what really this domestic market that has been created is for. It is not to milk for feel-good things," Sanyal said.

The EAC-PM Member also pointed out that R&D spend by corporates is still very weak. "Indian corporate sector invests very little in R&D. Why don't they? Because in some ways we protect, perhaps mollycoddle and protect them too much," he said.

"…it may have been necessary to provide that protection to bring them back from the fragile five environment. But now they are healthy. They are making record profits. The market is growing. I think the time has come to find ways of opening things up, getting more competition into the market," Sanyal said.

Private Capex

On tepid private sector investment, Sanyal said that it’s not true for everybody. "There are private sector companies that are going out there and really aggressively investing. But it is true that having nursed them back... Remember, there used to be this big major problem with the twin balance sheet problems, banks being bust and the corporate balance sheets being bust… and both those balance sheets and the government balance sheet itself have dramatically improved over time."

"The banks are in good health and corporate India is making record profits. So, the question now is, having brought them back, do you expect them to begin investing? As I said, some of them are. But it is also the case that what has happened is that in many sectors, there is perhaps not adequate amount of competition," said Sanyal.