Manufacturing Opinions

Farm Loan Waivers – ‘Necessary’ When UPA Does It, ‘Suicidal’ When NDA Does It

Farm Loan Waiver

Farm loan waiver is an issue that generates a lot of commentary. In a country where agriculture sector employs a huge chunk of the workforce and provides livelihoods for millions, it is but natural that farm loan waivers would be debated hotly.

Recently, after a few states gave loan waivers, sections of the media reported that loan waivers do not do any good for the farming community and that they destroy the culture of responsibly repaying loans.

At the same time, let us also remember that a loan waiver was implemented by the Centre during the UPA era. They key difference is, now, it is the states who are providing loan waivers while the Centre has steadfastly refused to do so.

Even with such a difference, the narrative pushed by the media on the subject of farm loan waivers, during NDA and the UPA tenure reveals contrasts. The headlines and excerpts of stories tell the story themselves.

Narratives Then – 2008-2013

There were many positive headlines with favourable rationale of a ‘poll masterstroke’ about the UPA government’s decision to go for a farm loan waiver. Such news with elections around the corner in the year 2008 produces an impact of its own.

The arguments made to defend the farm loan waiver were that it would revive Indian agriculture and boost rural incomes. Here is an article from 2008 that says, “The package, which could end up totalling as much as Rs 90,000 crore depending on the final shape of the proposals, is at the core of efforts by the ruling United Progressive Alliance and its largest constituent, the Congress party, to revive Indian agriculture—and hopefully ride back to power in elections due in about a year.”

Another piece, this by Panajoy Guha Thakurta, presented the loan waiver as the most significant aspect of the budget. While trying to subtly justify the loan waiver, he wrote:

“Two out of three Indians depend on agriculture for their livelihood. The farm sector that accounts for less than one-fifth of the country’s gross domestic product has been growing the slowest.

Whereas the economy as a whole has expanded by a record 9% a year three years in succession for the first time since India became politically independent in 1947, the farm sector has languished and is slated to grow by a niggardly 2.6% this financial year.

What has become a politically volatile issue in recent years is the high incidence of farmers committing suicide – not less than 10,000 a year, according to government estimates – because of their inability to repay loans taken mainly from usurious local moneylenders.”

Here is another piece that says – “On the face of it, it should be seen as a bold move. It is easily the single largest loan-waiver–“estimated at Rs.50,000 crore and the OTS relief on the overdue loans is estimated at Rs.10,000 crore”– ever in the history of India. And perhaps nobody–not even the most hard-hearted of market-economists–would dispute that something needed to be done urgently for the distressing situation of the debt-entrapped farmers, for whom this loan-waiver has ostensibly been announced.”

It starts out hailing the move, calling it bold. It also looks to convince readers that farm loan waiver is not only a bold move but even from the economic perspective it’s necessity can’t be questioned since ‘not even the most hard-hearted of market-economists’ would question the fact that ‘something needed to be done urgently’. While the overall piece actually tries to analyse some shortcomings with the farm loan waiver, it hails it and merely wants some tweaks.

An op-ed column headlinedFarm loan waiver won LS polls for Cong”, successfully stitched the correlation between favourable election results and the waiver. “The mega farm loan waiver scheme of UPA government is a significant factor in congress’s stunning victory in the 2009 parliamentary elections. Now, there are numbers to back the claim. Figures show that states which topped the list in waiving loans of farmers are also those where Congress did surprisingly well in the polls.”

Narratives Now - 2014-2018

Now, in last year of five-year term of NDA i.e. year 2018, the narrative pushed by media is quite opposite to the narrative set in the UPA era.

The writing on the wall is clear. Now, farm loan waivers aren’t such a good idea any more. When Prime Minister Narendra Modi, campaigning in the Uttar Pradesh elections for his party, announced a plan to relieve farmers from prevailing distress through farm loan waiver, see how an op-ed says, “Prime Minister Narendra Modi pushed Fadnavis, and possibly some other chief ministers too, onto this suicidal trajectory, when he announced in a campaign rally on 15 February that the BJP, if voted to power in Uttar Pradesh, would waive crop loans.

In UPA era it was a revolutionary move and the image of Manmohan Singh as an economist was mentioned to give the move some sort of a halo. However, now it was being called unbecoming of the Prime Minister – “It was unbecoming of the Prime Minister to make such a populist promise in a state assembly election and commit the future government to this gigantic expense”. This, when Modi wasn’t actually announcing a nationwide waiver that the Centre would carry out, as opposed to a state-level waiver where the state government would finance it. The Centre has clarified time and again that it will not waive farm loans and will leave it to states. This is being called ‘unbecoming’ as against a Prime Minister who made his own Finance Minister announce a loan waiver from the Centre.

Another piece is headlined “Loan waivers for Uttar Pradesh farmers would only snare them in a low-income trap”.

It says, “Given the scenario the loan waiver of the Uttar Pradesh government will only serve to further squeeze the availability of credit to farmers in the next few years. This is because the spread of the loan waiver culture will dissuade farmers from making timely repayments and also make the banks more cautious in deploying funds.”.