Saturday, November 23, 2019

Will we reach a perfect Gini score?

A crop insurance scheme the Pradhan Mantri Fasal Bima Yojana was launched in 2016 to protect farmers from crop damage due to adverse weather conditions and, "Premiums had been automatically deducted from their crop loans accounts held by a public sector bank without their consent," wrote S Bera. "As on 1 November, insurance companies owe farmers Rs 2,511 crore (Rs 25.11 billion) from the kharif 2018 crop season (16% of estimated claims). This amounts to delay of more than a year from the date of harvest." Food inflation has risen to 7.9%, "the highest since 2014", wrote Prof Himanshu. "Urban food inflation was in double digits, at 10.5%, the highest for the Bharatiya Janata Party government's tenure since August 2014, while rural inflation rose to 6.4%." "Given that food still constitutes almost two-thirds of the consumption basket of the poor, rising inflation together with falling incomes places a double burden on them." The government has taken steps to bring prices of certain vegetables down by banning export of onions till February. It is also importing 120,000 tonnes of onions. Onion prices have risen because of heavy late rains in onion growing states of Maharashtra and Karnataka which destroyed crops and interfered with transport to key markets in the north. Poor farmers have not only lost their crops but prices of whatever they can salvage is suppressed by government actions and they cannot get insurance. "Farmer distrust regarding the scheme has only gained strength after four private insurers .... did not bid for insurance clusters in the kharif 2019 crop season." "The challenge for the government is not only to revive growth in the economy, but also to manage inflation so as to protect the poorest of the poor. Fortunately, both these objectives can be achieved through a single solution, which is to raise wages for the poor." The government is ahead of the curve. Prime Minister Narendra Modi promised to waive all loans  to farmers. Farmers are getting a handout of Rs 6,000 per year and have been promised a pension of Rs 3,000 per month on reaching the age of 60 years. Poor people are entitled to free treatment in private hospitals up to total of Rs 500,000 under Ayushman Bharat scheme. From free electricity and gas connections to loans under the Mudra scheme which has a default of Rs 72.77 billion. So much spending needs to be met through taxes. In 2019, 56.5 million filed income tax returns but not everyone earns enough to pay income tax. Saddled with huge debts due to spectrum charges, licence fees and penalties, Idea Vodafone may become bankrupt leaving just two companies in the telecom sector. Tax officials wanted to impose GST on salaries of CEOs of companies even though these officers maybe paying income tax at the highest rates of 42.74% due to excessive surcharge. The order was later canceled. State governments set rates for sale of real estate according to whim, known as 'circle rate'. Prices have dropped but if anyone sells his property below circle rate, due to distress, he will have to pay capital gains on his loss. India cannot export because our products are expensive due to taxes so the government resorted to import substitution through high tariffs, wrote Puja Mehra. Gradually, everyone, except politicians and civil servants, will be poor. Perhaps, we will be the first country to reach a perfect Gini Coefficient of 1. That will be Nirvana of nothingness. 

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