By Desk FnF | PUBLISHED: 19, Dec 2018, 19:02 pm IST | UPDATED: 25, Dec 2018, 16:00 pm IST
The thing about farm loan waiver is that it is bad economics and worse politics. It has a limited, transitory impact on small and marginal farmers and those involved in tenant farming — a segment that has been hit hardest by the agrarian crisis and relies on credit from informal sources. It also encourages credit indiscipline among those who are in a position to repay and penalises honest practices. The waivers also create a perverse paradigm where the big and mid-size farmers benefit, and small and marginal farmers are pushed towards the informal sector. In other words, it has the opposite effect of the intended outcome.
The bet on ‘competitive populism’ may have prompted Rahul to pump up the rhetoric and pull down the political discourse by uttering “we won’t let Modi ji sleep or rest or sit in peace until we make him waive farmers’ loans”. It is a clever tactic, aimed at pre-empting BJP’s moves in this direction. If the Centre comes out now with a debt-relief package of several thousand crores just before the Lok Sabha polls, Congress may claim the credit for it.
If nothing else, this should be reason enough for Modi not to fall into the trap of loan waivers and maintain the path of fiscal prudence. The signs, though, are discouraging. Following Congress’ win in three Hindi heartland states and announcement of debt-relief packages, BJP-ruled states such as Gujarat and Assam have followed suit. While the Vijay Rupani government in Gujarat has waived off Rs 650 crore rural electricity bills, the Sarbananda Sonowal government in Assam has announced a loan waiver package of Rs 600 crore.
In fact, if Congress has been guilty of profligacy, BJP’s record has been no better. Some may even argue that this “race to the bottom” began when UP chief minister Yogi Adityanath waived off farm loans worth more than Rs 7,000 crore last year, prompting similar moves by Devendra Fadnavis government in Maharashtra. This competitive populism is sure to wreck the finances of states that are already struggling and put the NDA government under tremendous pressure ahead of 2019 polls.
Rahul has tweeted enthusiastically about new Madhya Pradesh chief minister Kamal Nath waiving off farm loans “as promised”. He forgot to mention perhaps that Nath’s loan-waiver scheme comes with several riders that leaves out many farmers outside the eligibility loop. According to the Madhya Praesh government notification, the crop loan waiver has a cut-off limit of 31 March, and it will only address “outstanding short-term crop loans of up to Rs 2 lakh as on March 31, 2018, taken from nationalised and co-operative banks by farmers”. The eligibility will apparently be determined “through an exercise”,
The BJP has accused Congress of cheating farmers and pointed out that Rahul never mentioned a “cut-off” date for loan waivers during his poll campaign. As they say, devil lies in the details. It is instructive to note how Congress is dealing with the after-effects of this risky strategy elsewhere.
Karnataka, where Congress has a ruling alliance with JD(S), has requested the Modi government at Centre to bear half the cost of its proposed farm loan waiver “to help reduce the burden on the state’s coffers”. During a visit to New Delhi in June, Chief Minister HD Kumaraswamy had requested.