LPG and LIC in India: An Overview

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Questions and Answers

What was a primary reason India initiated economic liberalisation?

To reduce external debts

To combat a declining economic trend (correct)

To increase foreign exchange reserves

To strengthen internal debt management

Which factor contributed significantly to India's recognition of the need for liberalisation?

Growth of domestic industries

Political isolation from global markets

Technological advancements worldwide (correct)

A stable political environment

What was the first measure taken by Dr. Manmohan Singh to recover India's monetary system?

Increasing tariffs on imports

Securing international loans

Changing the exchange rate structure (correct)

Implementing stringent regulations

What does the emergence of an Asian Common Market signify for countries in the region?

A move towards economic unity Signup and view all the answers

Which of the following was NOT mentioned as a requirement for India in the global market?

Increased labor costs Signup and view all the answers

What was one effect of increasing the inflow of foreign capital into India?

Increased production and export of goods Signup and view all the answers

What challenge did India face regarding foreign investors before liberalisation?

Lack of appropriate liberalisation Signup and view all the answers

Which countries are identified as having successful business operations in the Asia-Pacific block?

Japan and South Korea Signup and view all the answers

What was the primary reason for the establishment of the Life Insurance Corporation of India in 1956?

To nationalize the insurance business Signup and view all the answers

Which of the following challenges is NOT identified in the content as faced by the LIC?

Lack of innovation in product offerings Signup and view all the answers

How has the introduction of the new economic policy in 1991 affected the Indian life insurance industry?

It allowed more private players to enter the market. Signup and view all the answers

What is one of the main objectives of the LIC?

To provide adequate financial coverage to all insurable persons Signup and view all the answers

Which aspect contributes to the LIC achieving relatively little compared to developed countries' insurance industries?

Low capital per income Signup and view all the answers

What is a highlighted impact of liberalization, privatization, and globalization on LIC?

Enhanced competition from private insurers Signup and view all the answers

Which research methodology is primarily employed to analyze the LIC's performance?

Descriptive research design Signup and view all the answers

What has contributed to the establishment of various challenges in the Indian life insurance industry?

Economic disparities among classes Signup and view all the answers

What was one of the primary reasons for the liberalization of the Indian economy in 1991?

To dismantle bureaucratic restrictions Signup and view all the answers

How did the Indian government aim to appease public fears about foreign investments?

By gaining the confidence of foreign investors Signup and view all the answers

Which of the following was NOT a key change introduced at the domestic level during the liberalization process?

Disinvesting in highly profit-making PSUs Signup and view all the answers

What specific measure was taken to address the issues of chronic public sector enterprises?

Referring them to the Board for Industrial and Financial Reconstruction Signup and view all the answers

What was a significant outcome of the LPG model introduced in 1991?

Enhanced participation of the private sector Signup and view all the answers

What type of foreign direct investment was the Indian government willing to permit under the liberalization policies?

51% foreign equity in high priority sectors Signup and view all the answers

Which of the following factors contributed to the failure to privatize certain loss-making PSUs?

Lack of interest from private buyers Signup and view all the answers

Which action taken during the liberalization process was aimed at improving the quality of goods and services?

Introducing greater foreign competition Signup and view all the answers

What was a primary aim of the nationalization of the life insurance industry in India?

To spread life insurance to rural areas Signup and view all the answers

Which organization was formed as a result of merging about 250 life insurance corporations in India?

Life Insurance Corporation of India Signup and view all the answers

What was one of the significant findings of the R.N. Malhotra committee regarding the Life Insurance Corporation?

Only 22% of the insurable population was insured. Signup and view all the answers

What was one of the provisions of the Insurance Regulatory and Development Authority Act, 1999?

Foreign companies can have a maximum of 26% stake as joint ventures Signup and view all the answers

How much did the annual business of LIC grow from 1957 to 1999?

From 336.3 crores to 459201 crores Signup and view all the answers

What issue was the Life Insurance Corporation facing prior to the entry of private insurers?

Lack of sensitivity towards policyholders Signup and view all the answers

Which of the following was a consequence of privatization in the Indian insurance market?

Increase in new insurance schemes and competition Signup and view all the answers

Which achievement of LIC indicates its growth in policy issuance by 1999?

Policies growing from 74 crores to 127389.06 crores Signup and view all the answers

What was the primary reason for the establishment of the Oriental Life Insurance Company in Calcutta in 1818?

To help widows of European kins. Signup and view all the answers

Which law enacted by the British parliament led to the cessation of 174 life insurance companies in India?

Insurance Act 1870 Signup and view all the answers

What was the status of life insurance companies in India from 1914 to 1940?

Growth in the number of companies from 44 to 195. Signup and view all the answers

Which of the following companies is recognized as the first Indian insurance company?

Bombay Life Assurance Society Signup and view all the answers

What significant event in the Indian insurance sector occurred in 1948?

Establishment of 209 life insurance companies. Signup and view all the answers

What was a significant challenge faced by the Indian life insurance industry before nationalization?

Involvement in malpractices by some companies. Signup and view all the answers

Who were some of the key figures that contributed to the inclusion of Indians in the insurance business?

Raja Ram Mohan Roy and Dwarakanath Tagore. Signup and view all the answers

What aspect of the life insurance industry was heavily regulated by the Insurance Act 1938?

Operational practices of life insurance companies. Signup and view all the answers

Study Notes

Liberalisation, Privatisation, and Globalisation (LPG) in India

India’s economic crises in the 1980s led to severe foreign exchange pressure and a debt trap
Dr. Manmohan Singh, the then Union Finance Minister, introduced measures to recover India’s ailing monetary system
The increase in foreign capital inflow was a major objective
The government opened previously reserved sectors to the private sector
Transferring loss-making units failed due to the lack of takers
The government started the disinvestment of highly profit-making PSUs to reduce fiscal deficits
The LPG model of development was introduced in 1991

Life Insurance Corporation of India (LIC)

LIC was established in 1956 as a wholly-owned corporation of the Government of India
LIC’s objectives were to spread life insurance widely, mobilize people’s savings, and invest funds for the best advantage of investors and the community
The LIC struggled to keep up with the life insurance industries in developed foreign countries due to poor quality strategies, lack of standard education and awareness about savings, low capital per income, and lack of employment opportunities
The introduction of the new economic policy in 1991 transformed the Indian life insurance industry
Many private players entered the industry, challenging competitors with new strategies

India’s Life Insurance Industry in the Pre-LPG Era

Life insurance was introduced in 1818 with the formation of the Oriental Life Insurance Company in Calcutta
The company was established to help widows of European kins
The first Indian insurance company, the Bombay Life Insurance Society, started operations in 1870
From 1914 to 1940, the number of companies grew from 44 to 195, and the insurance business in force from 22.44 crores to 304.03
The government of India nationalized the life insurance industry in January 1956

Post-Nationalisation Trend

The LIC of India achieved various objectives of nationalization
LIC's achievements in 40 years are summarized in the table below:

S/No	Particulars	1957	1999
1	Annual Business	336.3 Crores	459201 Crores
	Sum assured	8,00,000	91726000
	Policies	14 Crores	16136 Crores
	First year premium	75606 Crores	14857000
2	Business in force	1477 Crores	4171 Crores
	Sum assured	5,686,000	21671000
	Policies	74 Crores	127389.06 Crores
	Renewal premium	5.29 Crores	41040 Crores
3	Group business in force	69558 Crores	21671000
	Sum assured	4.28 Crores	3010 crores
	No.of lives	4.58 Crores	177970 Crores

Setting-up of IRDA and the Entry of Private Insurance Companies

The government and public were not completely satisfied with the LIC's progress
The government signed the GATT accord, committing to opening the insurance sector to private, local, and global operators
The Insurance Regulatory and Development Authority Act, 1999, was enacted, allowing outside insurance companies to operate in India with an Indian partner

IRDA & Entry of Private Companies

Foreign insurance companies can enter into the insurance sector in India as a joint venture with an Indian partner, with a maximum contribution of 26% of the joint venture capital.
The Life Insurance Industry of India witnessed a marvelous growth
LIC introduced several new schemes and products to meet the stiff competition from private insurance companies.

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Description

Explore the significant economic reforms in India through Liberalisation, Privatisation, and Globalisation (LPG) initiated in 1991, and understand the establishment and objectives of the Life Insurance Corporation (LIC) of India. This quiz delves into the major events that shaped India's economy during this pivotal time. Test your knowledge of these critical developments and their implications for Indian society.