No Country For Farmers

In the headlong rush towards ‘development’, the Indian farmer seems to have fallen through the cracks.

- Ajit Kumar Jha

See the figure below? 3,000,000,000,000. The number 3 followed by 12 zeroes. That is the burden the country will have to bear if all states waived farmer loans before the 2019 Lok Sabha polls. This is an estimate based on Merrill Lynch’s calculation that such waivers will cost India 2 per cent of its 2015 GDP ($2,089 billion). It was enough for the wealth management advisory to raise the first red flag, declaring that “farm loan waivers of up to 2 per cent of the GDP in the runup to the 2019 hustings pose fiscal/rate risk and impacts the credit culture”. The warning note came in the wake of the Uttar Pradesh government of Yogi Adityanath announcing in March that it was sanctioning farm loan waivers to the tune of Rs 36,359 crore, or 0.4 per cent of the state’s Rs 12.37 lakh crore GDP. Inevitably, this was followed by demands for similar concessions to farmers in Maharashtra, Punjab, Haryana, Tamil Nadu, Telangana and Andhra Pradesh.

Despite the Centre urging the states to keep their finances in mind before announcing populist measures, Merrill Lynch analysts say the states will continue to be in breach of the indicative 3-3.5 per cent fiscal deficit numbers, a key risk to the fiscal roadmap proposed by the N.K. Singh committee this January.

Reserve Bank of India governor Urjit Patel termed loan waivers a “moral hazard”, saying they undermined an honest credit culture. Chief economic advisor Arvind Subramanian and SBI chairperson Arundhati Bhattacharya were equally critical. Left economists did bat for the move, saying if banks can have NPAs and black money continues to be stashed abroad, why can’t farmers be waived their loans?