After waving farm loans of nearly INR 60,000 crore in three states Congress party chief, Mr. Gandhi Tweeted “It’s done! Rajasthan, Madhya Pradesh & Chhattisgarh have waived farm loans. We asked for 10 days. We did it in 2”. One side where Congress’ Chief, Mr. Gandhi is busy in celebrating his victory, Niti Aayog Chairman Raj Kumar slammed him by saying “Farm loan waiver is not a solution to farm sector distress. It is not a solution but is palliative”.
To get a clear picture about the statement given by Mr. Raj Kumar, we must investigate the details of agricultural loan waiver in India. First farm loan waiver was implemented nationwide in 1990 by Janata Party government led by the then Prime Minister V.P. Singh which costed the government INR 10,000 crores. Since then trend of agricultural loan waving commenced, farmers started agitating and political parties started cashing this opportunity to collect votes without acting upon real issues of agrarian crisis.
After 1990, another major blow to country’s economy was led by UPA (United Progressive Alliance) government. For first four years, Congress Party did not take any substantial step to elevate farmer’s situation. Then in 2008, Mr. P. Chidambaram then Finance Minister announced a nationwide farm loan waiver package named Agricultural Debt Waiver and Debt Relieve Scheme (ADWDRS) which included complete waiver of loan given to small and marginal farmers in India, costing Rs 650 billion equivalent to 1.3% of India’s GDP.
ADWDRS faced sharp criticism by opposition parties, bankers, agricultural expert, saying it as a populist trump card of UPA government to secure power in forthcoming elections. The loan waiver is “an electoral sop that involves a lot of statistical jugglery and very little of real hope for Indian farmers,” said Mr. Parshuram Ray, director of the New Delhi-based Centre for Environment and Food Security.”It is unlikely to address any of the fundamental problems facing poor farmers. True to India’s electoral politics, this scheme has very little of substance and most of it is just symbolism designed to woo the poor and gullible voters,” added Mr. Ray.
Criticism aside, this step proved to be a major trump card for UPA and it came back in power in 2009, again for five years. But According to CAG (Comptroller and Auditor General) sources, AWDRDS was a total failure of UPA government regarding its implementation, monitoring and outcomes. As Mr. P. Sainath slammed the scheme by saying that Congress loan waiver policy couldn’t reach to needy farmers. “Bulk of farm loan waivers which UPA announced in 2008 dealt with bank debt. But 90% of the debt owed by farmers is to private lenders,” Sainath said.
Since 2008 till March 2017, over the nine years of period both central and state government has waived nearly US$14 billion in farm loans. Again in 2017 only, governments of four states i.e. Uttar Pradesh, Maharashtra, Punjab and Karnataka have waived farm loans worth of US$13.6 to keep their poll promises. This populist card of loan waiver alone has costed US$49.1 billion to country’s economy in 2016-17. And According to a Bank of America Merrill Lynch (BofA-ML) report, farm loan waivers by states might hit Rs 2,57,000 crore i.e. 2% of Gross Domestic Products (GDP) by 2019 general elections.
Everyone knows that farm loan waivers are not the long-term solution of agrarian crisis. This policy is dangerous for country’s economy and has been failed on front foot as farmers are still forced to claim their lives. What government must focus on is building infrastructures, better irrigation facilities, water conservation, enough storage system, transparency in business module, restricting middle men and implementing fair prices of crops.
The RBI has been continuously opposing these loan waivers. Ex-RBI Governor Urjit Patel stated this policy “undermines an honest credit culture, it impacts credit discipline, it blunts incentives for future borrowers to repay, in other words, waivers engender moral hazard.” These frequent loan waivers are pushing public sector banks towards crisis which are already in stress. As the amount of bad loan is increasing and it would affect other borrowings with hikes in interest rates.
But once again before 2019 general elections, UPA chief, Mr. Gandhi is playing the same populist card of 2008. Without looking into proper measures and outcomes, he has promised a nationwide loan waiver just to win the election.Totally ignorant about ground reality of crisis and country’s economical progress, UPA has become too desperate to come back in power.
Once again trillions are on stake, banks could go in debt, country’s economy could sink, even then farmers would keep on committing suicide and that’s why Mr. Gandhi, it’s absolutely not done!
