Why Farm Loan Waiver Bribe for Voters Dangerous for Indian Economy?

After winning the election, the Congress leader and the chief minister of Madhya Pradesh, Kamal Nath doled out a crop loan waiver up to Rs 2 lakh as on March 31, 2018 (taken from nationalized and cooperative banks).  Hearing this announcement, the Chhattisgarh CM Bhupesh Bhagel also followed the similar pattern and announced a proposal to waive off the farm loan to attract the farmers and to retain its vote bank.

Farm Loan Waivers to ruin the Indian economy?

In the wake of economic downturn, low GDP ratio, burning oil prices, rising dollar, and political uncertainties such fiscal sops would do harm than good. The statistics reveal that though the chief minister has signed- off for waiver within 10 minutes of assuming charge but the government has neither thought about the fund crunch situation that the state is facing nor it has disclosed the exact amount that the finance ministry will be burdened with.  But it has promised to find out the new sources of income, which would be definitely the pocket (in form of taxes) of a common man.

There lies a big question on the criteria of farm loan waiver on the announcement that loans would be written off till March 31, 2019.

Even the farmers have objected the announcement and have said that they normally repay the loans and obtain the new ones till April 1, 2018. So, is it a gimmick or a trick to loot the vote-banks?

Even the RBI governor and its think tank believes that announcing farm loan waiver and other fiscal sops in such distress time would induce the uncertainties further may lead to loss of FDI investment.

Further, if we look closely into the facts reveal, we come to notice that the farmer suicide rate has been falling down or has been stagnant in the recent years, after peaking up high in 2002-04. True, crop failures, harassment by money lenders, drastic change in weather conditions can drive farmers to suicide but there is a little evidence that farm loan waivers or fertilizer and electrical subsides would reduce the farmer suicide.

Raghuram Rajan, former RBI Governor has also opposed this political stunt and rightly written to Election commission of India:

“I have written a letter to the Election Commissioner saying that it (farm loan waiver) should be taken off the table. Certainly there is reason to think about farm distress. However, they (benefits of welfare measures) often go to the best connected. Second, it obviously creates enormous problems for the fiscal (health) of the state once those waivers are done. And I think, unfortunately, it inhibits investment down the line,” he said in an interview.

So, let’s stop defending economic freebies to the farmers and encourage them to use the latest technology to increase its harvest and focus on the solutions that would save the backbone of Indian economy.