Crop Insurance

Crop Insurance
Crop Insurance

Why do farmers in India not have access to cheap and competing crop insurance policies? Because entrepreneurs don’t want to open insurance companies in India.

“The government has no business to do business” – Narendra Modi

Why entrepreneurs don’t want to start insurance companies in India? Because it is not profitable to open an insurance company in India.

Why it is not profitable to open an insurance company in India? Because farmers won’t buy insurance policies offered by a private company (and because of regulation and bureaucracy).

Why farmers will not buy insurance policies from a private company? Because farmers don’t trust that they will get paid even if the conditions in the insurance policies are met.

Why farmers won’t trust an insurance contract? Because they have not seen in their lifetime a judicial system that can resolve conflicts expeditiously and therefore don’t trust that the courts will punish an insurance company with fines for a fraudulent activity.

What is Arun Jaitley’s brilliant solution to this problem? The government to do the business of insurance and sell insurance policies to farmers.

What will happen when the government’s insurance business loses money (and it definitely will like all government schemes)? The RBI will print money and give it to the government.

“They think that the cure to big government is to have bigger government… the only effective cure is to reduce the scope of government – get government out of the business.” – Milton Friedman

What will be the impact of the money printing? Inflation. Who does inflation hurt the most? The poor. Who are the poorest in India? The farmers.

Shubhendu Pathak completed his B.Tech from IIT Delhi and is currently working as a finance professional in the U.S.
Shubhendu Pathak


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