Image Courtesy – DNA India
A trend which has become famous but is not economical. The idea seems to be bad politics as well as bad economics because it may win the political party some votes but is not durable in the long run. Waiver of loan is a plain action where the credit climate is affected severely. It will be counterproductive not only for the state but for the entire credit market.
Farmers in India are in chronic debt problems, and agriculture sector actually needs government support. In India, still, not all farmers are keen for a debt bailout. High levels of household debts have been identified as a significant cause of farmers’ distress in India. Approximately 52 per cent of India’s agricultural households are indebted. The debt relief program has been failed to provide required help to landless farm workers who don’t have access to bank loans and some small farmers that depend on money lenders.
The critics of Farmer’s loan waiver argue that expenditure on loan waivers will eventually reduce the fiscal space for public expenditure in agriculture. India is in need of massive investment in areas such as water conservation, irrigation, better storage facilities, agricultural research and market connectivity. The agricultural problems in Indian are structural in nature. These problems demand long-term solutions. In this way, loan waivers will only end up complicating the problem. The idea of loan waiver smacks of political populism and in the past too, the Indian economy has suffered a lot due to competitive populism. It’s time that the governments should address the real issues.
Some agricultural experts think that loan waivers should be used only when farmers have no other way of getting credit for their next crop as farm debt waiver is not a permanent solution to farmers’ problems. The farm loan waiver would only alleviate the debt problems of the farmers.
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