Farm Loan Waivers in India - Editorial

It will hamper India’s stated objective to reduce its total public debt, Centre and states combined, to 60% of the GDP.

· 2 min read
Farm Loan Waivers in India - Editorial
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Farm Loan Waivers in India - Introduction

  • Eight state governments have given farm loan waivers worth ₹1.9 trillion - NSSO Situation Assessment Survey of Agricultural Households shows 52% of farming households are indebted, the rates are 89-92% in some States. (Indebtedness got swollen and became the elephant in the room )
  • 75% of the farmer who committed suicide in Telangana are not farm owners but rather tenant farmers or contract farmers.
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Farm Loan Waiver: Is it a Feasible and Acceptable Strategy?

  • Delay in loan repayment,
  • Increase in defaults, and
  • No significant productivity gains.
  • The shift from productive investments towards unproductive consumption and wilful defaults.
  • Even it doesn’t count on MSP, irrigation, etc which are the sole cause of distress
  • The majority of creditors are big farmers
  • Small farmers go for moneylenders so no gains here waivers impact the Indian economy?
  • MPC committee said waivers across states could hurt the finances of states and make them throw good money after bad, and stoke inflation.
  • Possibly it will worsen states’ debt-to-GDP ratio by 4 percentage points
  • It will hamper India’s stated objective to reduce its total public debt, Centre and states combined, to 60% of the GDP.

Solutions Beyond Farm Loan Waivers

Bill/Agenda, which has been developed by the AIKSCC, anticipates two key elements of reform:

  • It guarantees all farmers access to institutional credit;
  • Along with farm owners/ land-owning farmers, it also covers tenant farmers, Adivasi community (Tribal community), women farmers, and animal breeders and rearers.
  • Primarily requires the registration of all cultivators and availing them Kisan credit cards facility.
  • RBI did issue guidelines in 2014 for extending loans to Bhoomi Heen Kisan (landless farmers) and for a debt-swapping scheme to convert informal loans of farmers into bank loans, but they have remained on paper.
  • It establishes farmers’ distress and disaster relief commissions
  • For natural calamities/disasters and pestilential attacks, the commission can recommend or put forward the criteria to geographical areas or particular crops as distress-affected in any given year.
  • Losses faced by farmers due to the situation beyond their scope of mitigation deserve protection.

Conclusion:

A carefully crafted Farmer loan-waiver program may sustain the overall improvement of the regular farmer’s households by improving their productive investments in farming.

One possibility is to create/establish eligibility criteria depending on past loan utilization, investment, and repayment patterns over time.