Farm loan waivers are not the panacea -Anjani Kumar & Seema Bathla

-The Hindu Business Line

The Centre and States must eschew the politically expedient option of loan waivers and look for long-term solutions

The sweeping wave of loan waivers has generated serious debates across the country on their economics and likely outcomes. Till date 12 States have announced loan waiver amounting to more than Rs.2 lakh crore.

Loan waiver cannot be a solution to address the agrarian crisis, instead the government must look for long-term solutions. There is also the danger of intense competition among the political parties to win by promising the farm loan waiver and projecting themselves as the protectors of farmers becoming the norm of the day before each election.

India has a long history of loan waivers. In 1990, the then Prime Minister announced an agricultural debt relief scheme totalling to Rs.10,000 crore for agricultural borrowers. In the same year, a similar scheme was announced by then Chief Minister of Haryana, waiving Rs.227.5 crore of farm loans by banks and cooperatives.

Over the next decade despite the RBI’s warning of the adverse consequences of such measures, several States resorted to them. In 2008, the UPA government announced one of the largest debt waiver schemes in history. The Agricultural Debt Waiver and Debt Relief Scheme waived Rs.60,000 crore spread across 237 districts and reaching 30 million farmers. Over the next few years the programme received widespread criticism from economists.

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The Hindu Business Line, 8 January, 2019,

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