New Delhi: The election results in which BJP lost three key states have once again pointed to the agrarian crisis and triggered demands for loan waivers. Pressure on the Centre has intensified ahead of the 2019 polls and comes against the backdrop of a tight fiscal situation.
New Delhi: The election results in which BJP lost three key states have once again pointed to the agrarian crisis and triggered demands for loan waivers. Pressure on the Centre has intensified ahead of the 2019 polls and comes against the backdrop of a tight fiscal situation.
The government has committed itself to meet the fiscal deficit target of 3.3% of GDP. In the aftermath of several states unveiling waiver schemes, finance minister Arun Jaitley had made it clear last year that the Centre won’t be part of any such plan and states will have to bear the cost from their resources.
Since 2014 seven states have unveiled loan waivers totalling nearly Rs 182,802 crore. Agriculture economist Ashok Gulati reckons that the total farm loan waiver may touch Rs 4 lakh crore in the run-up to the general elections in 2019 as other states join the fray.
Congress, which has won the Chhattisgarh state assembly polls, has vowed to waive farm loans as soon as it is sworn in. A similar promise has been made in neighbouring Madhya Pradesh.
The first countrywide debt waiver scheme was implemented in 1990 under the VP Singh government and the total cost was around Rs 10,000 crore. The UPA government in its 2008-09 budget had announced a one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated 40 million far mers.
While credit to the farm sector has been growing, many experts feel farm loan waivers are a quick fix to resolve the wider problems hobbling the country’s agrarian sector.
The RBI in a report had said that debt waivers can deflect the state from its fiscal consolidation path. “If the waivers are not targeted efficiently… the potential for these waivers contributing to inflationary pressures via higher fiscal deficits remains a key concern,” RBI said in a report on state finances. Some economists say loan waiver is the “worst solution” to alleviate rural distress and instead back an income support scheme for farmers.
“Bold steps now have to be taken to allay the apprehensions of the farming community. An Income Support Scheme for small and marginal farmers might turn out be a viable solution,” said Soumya Kanti Ghosh, group chief economic advisor, SBI. “The cost of such a scheme will be around only Rs 50,000 crore a year -- or 0.3% of GDP. This is lower than the incremental debt waiver,” he added.
The government has committed itself to meet the fiscal deficit target of 3.3% of GDP. In the aftermath of several states unveiling waiver schemes, finance minister Arun Jaitley had made it clear last year that the Centre won’t be part of any such plan and states will have to bear the cost from their resources.
Since 2014 seven states have unveiled loan waivers totalling nearly Rs 182,802 crore. Agriculture economist Ashok Gulati reckons that the total farm loan waiver may touch Rs 4 lakh crore in the run-up to the general elections in 2019 as other states join the fray.
Congress, which has won the Chhattisgarh state assembly polls, has vowed to waive farm loans as soon as it is sworn in. A similar promise has been made in neighbouring Madhya Pradesh.
The first countrywide debt waiver scheme was implemented in 1990 under the VP Singh government and the total cost was around Rs 10,000 crore. The UPA government in its 2008-09 budget had announced a one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated 40 million far mers.
While credit to the farm sector has been growing, many experts feel farm loan waivers are a quick fix to resolve the wider problems hobbling the country’s agrarian sector.
The RBI in a report had said that debt waivers can deflect the state from its fiscal consolidation path. “If the waivers are not targeted efficiently… the potential for these waivers contributing to inflationary pressures via higher fiscal deficits remains a key concern,” RBI said in a report on state finances. Some economists say loan waiver is the “worst solution” to alleviate rural distress and instead back an income support scheme for farmers.
“Bold steps now have to be taken to allay the apprehensions of the farming community. An Income Support Scheme for small and marginal farmers might turn out be a viable solution,” said Soumya Kanti Ghosh, group chief economic advisor, SBI. “The cost of such a scheme will be around only Rs 50,000 crore a year -- or 0.3% of GDP. This is lower than the incremental debt waiver,” he added.