The clamour for farm loan waiver has been rising in the country. The Odisha government recently rolled out a scheme call ‘KALIA’ (Krushak Assistance for Livelihood and Income Augmentation) for small farmers and landless agricultural labourers. Under this scheme, a financial assistance in the form of a loan will be provided to encourage cultivation and related activities.
Recently, during the assembly elections in five states, some parties promised to waive farm loans in their manifestoes. Subsequently, the new governments, including Rajasthan’s, have waived the farmers’ loans.
These developments show that loan waiver promise is a ‘vote catcher’. Consequently, most parties dole out such promises without realising the long term negative impact that populist moves like these have on the country’s economy.
We feel that the condition of our small scale industries is not good. The percentage of non-performing assets (NPAs) has been steadily rising in the industry sector.
In the agriculture sector also, NPAs are shooting through the roof due to farm loan waivers.
It would have been a very pragmatic move on the part of the government if it had waived the interest on the farm loans, and not the loans altogether.
To encourage the farmers, the government could have announced more loans with a lower interest rate for those farmers who timely repay their loans. Such incentives are a win-win situation for the both sides – the government and the farmers.
Today, India is moving towards becoming a capitalist state. And in a capitalistic state, one only talks about profit maximisation. Our country will remain a laggard till we promote sustainable development in all sectors.
Recently, Congress president Rahul Gandhi said at a rally that if voted to power, his party would waive the loans of all the farmers.
Some over-enthusiastic politicians reason that when people like Nirav Modi are allowed to run away after defaulting on loans worth Rs. 9000 crore, why the government can’t waive the loans of distressed farmers.
Now it is time to think whether a Nirav Modi episode can be a ground to waive the farm loans.
I feel that this policy of waiving farm loans to capture votes during elections is taking our economy in the wrong direction.
Once upon a time, our country’s economy was is such a bad shape that we had funds to purchase fuel (petrol and diesel) for only a few days. We were on the verge of bankruptcy. At that time, P.V. Narasimha Rao was the prime minister. He assigned the job to turnaround the economy to renowned economist Dr. Manmohan Singh, who later on himself became the prime minister.
It is a different thing that people ridicule him for being a ‘silent PM’. There are people who let their work do the talking.
Dr. Singh promoted liberalization, opened the country’s market, thereby giving a new lease of life to our industries.
As a result, our economy grew at a rapid pace, and the world started viewing India as an emerging economic power.
I strongly feel that politics and economics are separate things and need to be kept like that only.
As long as politicians continue to take economic decisions like that of loan waiver, our country will never have a robust economy.
I feel that Supreme Court can also play a role in ensuring that policy decisions are left to experts only.
Even former RBI governor Raghuram Rajan had recently said that farm loan waivers should not form a part of poll promises as has been the trend of late.
If we truly want to help our farmers, then we need to frame schemes which ensure more fertility of land, promote organic farming, improve the quality of our seeds and livestock. This will bring sustainable growth in our villages, thereby raising the income and living standard of our farmers.
If a government announces a waiver of say Rs. 18,000 crore worth of loans, then it is imperative that it should also talk about ways to compensate the loss by generating the required revenue.
Unless there is a model to generate enough revenue, announcing a loan waiver as a poll promise is a crime, that damages the economy in a big way.