Chanakya IAS Academy Blog


Loan waivers are on you, FM tells States

farm loan waivers

Finance Minister Arun Jaitley reiterated that states that go ahead with farm loan waivers will have to generate funds for such waivers from their own resources.

The remark comes in the backdrop of farmers’ agitations across some States, such as Maharashtra and Uttar Pradesh which are both BJP ruled, announcing waivers. Also, there is a demands for waivers in states such as Madhya Pradesh and Haryana (both BJP-ruled), Punjab (Congress-ruled), and Tamil Nadu (under AIADMK government).

In March while speaking in the Rajya Sabha he stated,

  • The government has its own policies for supporting the agriculture sector, under which interest subvention and other support is provided and these will continue
  • But if a State wants to go ahead with farm loan waivers, it will have to find its own resources.
  • A situation will not arise where the Centre will help one state and not the others

Negative impacts of farm loan waivers:

  • Reserve Bank of India has warned of inflationary risks from fiscal slippages caused by large farm loan waivers
  • A farm loan waiver discourages those farmers who have been making timely repayment of their loans and they resort to default

Reasons of the farm crisis:

  • The problem is price discovery and currently a deflation in pulse and vegetable prices is being witnessed
  • The vegetable prices dipped because of fire sales during demonetization whereas pulses are cheaper because of high output this year combined with imports
  • Prices for eggs, oils, cereals and milk have also moderated
  • Along with them the new cattle laws threaten the viability of livestock and dairy farming
  • Though banks are in possession of surplus funds but rural lending shrank in several states such as Maharashtra and Punjab
  • The government must deliberate, how prudent a low food inflation policy is for our country.
  • If farmers do not get returns for their investments and labour, agriculture will no longer remain viable
Read 957 times Last modified on Monday, 03 July 2017 15:28

Leave a comment

Make sure you enter all the required information, indicated by an asterisk (*). HTML code is not allowed.