Indian agriculture is often compared to the act of gambling in the monsoon. With the prevailing drought conditions and falling agricultural outputs in certain areas has fuelled the farmer suicides throughout the country. However, the debt waiver scheme provides relief for many families thereby encouraging them to invest in the next crop. But these benefits don’t offer long term economic gain for farmers. Because the debt loan waiver has become a political lullaby.
The debt waivers are nothing but a race to the bottom. They are just populist palliatives that are trotted out during election season. Political parties are competing with each other to offer bigger waiver amount than the other. Debt waivers were a major plank of the Congress campaign in the three Hindi heartland states of Rajasthan, MP, and Chhattisgarh
In Rajasthan, the newly-appointed Congress government in December 2018 declared a farm loan waiver within 10 days. However, the party had been unsuccessful in waiving the debt off within 10 days of power.
Why solid solution needed?
The tradition of debt/farm loan waiver is not new, it has been running since 1990 when then Congress government introduced the concept of loan waiver in India. According to Niti Aayog, they neither help the country’s finances nor provide solutions to agrarian distress.
In December, Niti Aayog had given thumbs down to the concept of farm loan waiver in Rajasthan, including MP and Chhattisgarh.
Many economic experts feel that the money waived could be used for investing in infrastructure projects which help to eliminate middlemen and help them to reap maximum benefits of their products.
According to the economists and financial experts, loan waiver schemes disturb loan and credit discipline for any financial system. Though waivers can lead will full defaults among the farmers. If farm loan waivers are done more than twice, farmers will start to wait for the next loan waiver scheme, which is bad for the economy and agriculture.
Besides, taxpayers are at a loss, because loans will be waived only with hard earned money of taxpayers. Rich farmers could take advantage of the situations and push to take loans even if there is no need, in the hope of the next loan waiver scheme. This will impact the poor farmers who are genuinely in need of loans for crops.
The Indian farmer is honest and hardworking. The political parties have been clearly bribing and spoiling them to polarize vote bank. People of India need to understand this political strategy and choose the right government who is progressive and development driven.