In Rajasthan, the newly-appointed government headed by Ashok Gehlot is still discussing the waiver with the finance department presenting different scenarios. The Congress promise of waiving farm loan waiver could cost the exchequer about Rs 70,000 crore in Rajasthan, the state finance department has estimated.

Congress president Rahul Gandhi had promised that farm loans will be waived within 10 days of coming to power in the election-bound states. Of the three states Congress won, Madhya Pradesh and Chhattisgarh have already announced the waiver of short-term loans.

According to a finance department official, the complete waiver is likely to cost Rs 70,000 crore, of which Rs 50,000 crore are short-term loans (for one year or less). The official added that Rs 20,000 crore is due on state cooperative banks while the remaining on nationalized banks.

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A burden for the common man

According to the economists, it’s a big amount and will not be a beneficial step for the common men – it would be 47% of the total budget, that is Rs 99,000 crore. This type of loan waiving process are not productive activities for the economy – in long-term will leave a negative impact.

Vasundhara Raje government had earlier this year waived farm loans of up to Rs 50,000 from the state cooperative banks which benefitted around three million farmers and cost Rs 8,400 crore to the state exchequer.

Economists concern that there is very little scope for the government to borrow from the market because, in the present budget, it had a borrowing capacity of Rs 36,000 crore, of which a loan of about Rs 25,000 crore has already been taken. In addition, to waive the entire farm loan, the government will have to make a provision in the budget.