Modi Questions Efficacy Of Farm Loan Waivers As Demand For One Increases

Electoral stunt and a lollipop: that’s how Prime Minister Narendra Modi described farm loan waivers as he doubted their intended benefits.

“If farm loan waivers actually helped farmers, then we should definitely do it. But in this country earlier governments have also waived farm loans,” Modi said in a 95-minute-long interview with news agency ANI. “Yet, despite so many waivers, why does the farmer become indebted again? And then the government has to pledge waivers every election cycle.”

Calls for a farm loan waiver in India have been rising with another year of below average rainfall, depressed prices of farm produce and farmer suicides. The Indian National Congress, which is eyeing a comeback in the upcoming Lok Sabha elections, has already promised to do a country-wide farm loan waiver if it comes to power. It has already waived off farm loans in three states—Chhattisgarh, Rajasthan and Madhya Pradesh—where it recently came to power running a farmer-focussed campaign. Congress chief Rahul Gandhi has challenged the central government to do the same.

But Modi said such a tactic has failed to get farmers out of debt in the past, in 2008, when the Congress itself had waived farm loans worth Rs 60,000 crore. “We need to explain to the farmers that do loan waivers really benefit them? A very small portion of the farmers actually take loans from banks. Most farmers take loans from individual money lenders. And they are not part of the waiver. The farmer that is actually dying is outside the waiver.”

Modi also criticised the Congress government for not implementing the minimum support price hike when the MS Swaminathan-led committee had recommended it. “If in 2007, when the commission’s report was out, Congress had implemented the MSP hikes then by now it could've been perfected. And the farmer would have not been in debt. But instead of doing that they were looking of easy ways to win elections.”

The prime minister is not alone in doubting the effectiveness of loan waivers. Despite waivers being a popular policy option to capture the rural vote bank, economists have warned against it saying it hurts credit culture and weaken state finances. “Research shows that loan waiver never become a solution to farmer distress and it’s benefit don’t reach to the targeted person, due to various reasons such as lack of formal credit, identification of beneficiaries, etc.,” SBI Economic Research had said in a report last month.

The solutions lie in increasing the farmer’s income, Modi said. “We have to create a situation where they never are in debt.”

Modi said there needs to be value-addition to the farmer’s produce. He added the government is taking steps to bump farmer incomes by introducing them to food processing, making cold storage facilities available and organising crop transport through zoning.

Yet, agrarian distress in the country remains. Low food inflation has meant that farmers are getting measly sums of money for their produce. A recent report by PTI showed the extent of the problem after an onion farmer in Nashik had to sell his produce for a little over Re 1 per kilogram. He sent his earnings to the Prime Minister in protest.

Modi said that his government is committed to resolve farm distress. “We are committed to empowering the farmer, no matter how many steps it takes.”

It remains to be seen whether rising calls of waivers across the country will force the BJP into using the “lollipop”.