Loans are basically extension of money from bank to another party with an agreement that money will be repaid. These loans help in betterment of individuals or firms by providing them resources of development. But in a huge agrarian economy like India loans become problem for country, the one such problem is loan waiver by government. This loan waiver which was introduced to help the needy farmers has now become problem for country, as India is agricultural dependent country it faces many problems such as droughts, irregular monsoons, extreme hot and cold weather conditions. So, to avoid the extreme stress on farmers government sometimes sanctions waivers. But this waiver sometimes is used for personal amelioration of politicians. This has now become a trend to waive loans before elections for votes. This thing makes the system double dealing and burden for rest of population. This makes farmers not to repay loans even if they can and due to inefficient system, it is difficult to identify deserving farmers. So, income of farmers in form of tax and interests is not used for country because of tax exemptions and waivers to farmers which clearly is a burden on country and banks.
Loan waiver has remained always a political gimmick. It has defeated the purpose of providing loans to needy. It incites people to become defaulters, with the hope that Government will waive off loans some day, in this way, whole system of providing loans becomes a murky and inefficient business. Loan waiver which was to become a relief for affected is now economic burden for country, another serious problem is the exemption of tax of farmers which is often misused by wealthy farmers. This waiving encourages farmers to default on loans. Even governor of reserve bank has expressed their concern about this problem. Debt waivers in case of default reduce investments and farmers spend more on their utilization. This problem aggravates when this waiving is done for political benefits. For instance, the recent history of waivers is a case in point. These include the Agricultural Debt Waiver and Debt Relief (ADWDR) Scheme announced by the Central government in 2008 and State-specific farm-loan waivers announced by Andhra Pradesh and Telangana in 2014; Tamil Nadu in 2016; and Uttar Pradesh, Maharashtra, Punjab and Karnataka in 2017. As per RBI data, UP’s farm-loan waiver was at 36,000 crores – around 2.5 per cent of its Gross State Domestic Product (GSDP), while in Maharashtra it was at 34,000 crores. Punjab provided 1,500 crores in the State budget for 2017-18 for loan waiver, while Karnataka has announced a waiver amounting to 8,100 crores for farmers availing loans from cooperative banks.
The loan-waiver promise by States which had either gone to polls or are now going such as Telangana amount to 40,000-90,000 crores approximately. There has been a trend of many political parties to announce loan waiving before elections which benefit them votes and when any state provides wavier then there is an automatic demand of wavier in another state. Secondly the implementation has also many problems, sometimes this compensation from government doesn’t reach to people due to corrupt officials and most of the time it is a potential failure.
So, the magic wand of a waiver can offer temporary relief, but long-term solutions are needed to solve farmer woes. There is a need to draft some policies which can sustain long term benefits, giving subsidy or waiver to needy people. A strong political will is required to end this malpractice and contribute to nation’s development. The focus of government should be to increase income of farmers by educating about different techniques of crop growing, getting rid of middlemen which adversely impacts their income. Building farmer resilience to environmental shocks is a good way to reduce farmer vulnerability to natural calamities, this can be done by building public private partnership, for integrated agricultural development, crop insurance etc. A holistic approach is required to ensure regular supply of income to farmers. The government should minimise crop losses, post harvest losses, and ensure the access to the markets and suitable price of their produce, good storage houses for farmers and farm insurance is also a very good measure. Something needs to be done as soon as possible because “the future of agriculture is not in the faith born of words but of deeds”.
(Author is a Student)