Another side of farm loan waivers

A Kashmiri farmer works on rice plants in his field on the outskirts of Srinagar July 6, 2009. India will boost spending on irrigation and roll out more jobs and loans for farmers to spur the rural economy and lift farm sector growth to 4 percent, Finance Minister Pranab Mukherjee said on Monday. REUTERS/Fayaz Kabli (INDIAN-ADMINISTERED KASHMIR POLITICS BUSINESS AGRICULTURE)
A Kashmiri farmer works on rice plants in his field on the outskirts of Srinagar July 6, 2009. India will boost spending on irrigation and roll out more jobs and loans for farmers to spur the rural economy and lift farm sector growth to 4 percent, Finance Minister Pranab Mukherjee said on Monday. REUTERS/Fayaz Kabli (INDIAN-ADMINISTERED KASHMIR POLITICS BUSINESS AGRICULTURE)

As demands for farm-loan waivers gain momentum in Karnataka, Gujarat, Madhya Pradesh, Punjab and Haryana- after Maharashtra and Uttar Pradesh wrote off loans worth Rs 36,359 crore and Rs 30,000 crore respectively–The cumulative loan waiver of India stands at Rs 3.1 lakh crore.

This is 2.6% of the India’s gross domestic product (GDP) in 2016-17.

A waiver of this magnitude could pay for this year rural roads budget 16 times over . Furthermore, it would enhance India’s irrigation potential by 55% more in comparison to the last 60 years.

While such waivers could offer a much needed relief for 32.8 million indebted farmers, but fact of the matter is that it do not address a deeper malaise that is having a negative impact on the India’s agrarian economy.

The waivers are basically about discouraging suicides by farmers, apparently caused by widespread indebtedness.

There is no denying the fact that loan waivers have led to an increase in the non-performing assets of banks, more so public-sector banks.

According to one study, a third of Indian small and marginal farmers have access to institutional credit.