Both Indian agriculture and the farmers are ailing. Growth rate in the agriculture sector has been a poor 2.6 per cent while the GDP is around 8.7 per cent and industrial and service sectors have touched double digit growth rates. During the last decade, agricultural production has just averaged 1.2 per cent.
Though statistically speaking 219 million tonnes of foodgrain production is a record, it is well known that production has reached a plateau, necessitating massive imports of food grains, pulses and edible oils. The prices of agro commodities have been rising,but are outpaced by the costs of cultivation. World over, the prices are rising and in the ultimate analysis the food security of the country is threatened.
Viewed in this context, no one can dispute that farming and farmers needed a stimulus. But is the loan waiver scheme the right kind of solution? Can the staggering outlay of Rs 60,000 crore help the agrarian economy and boost production? The measure may provide temporary relief, but don’t address the long-term issues.
Repayment culture
The farmers’ investment needs for the kharif’08 season are to be provided by the banks, helping them make a fresh start. It would be simplistic to assume that all would seek fresh credit or they would get it easily. The repayment culture gets badly impacted and it would be several years before some semblance of loan discipline can be restored. Given the surcharged and tense environment in the arena of loan recovery, the l waiver will only further vitiate the atmosphere.
To fulfil their mandatory obligations banks might implement the scheme of waiver and even may disburse fresh loans and oblige the gov
Too many flaws
From the farmers’ perspective too, the scheme has too many flaws. First, it sends a message to the honest borrowers, for the umpteenth time, that they have been unwise in repaying their loans. Second, the farmers who have invested their own resources or borrowed from money lenders, with no borrowings from the banks, stand to lose out. Third, the conscious and genuine farmers who have invested more of their savings than borrowings would be deprived of the benefit from this generous scheme.
An unintended lesson from the example will encourage farmers to borrow to the hilt from the banks, keeping their savings intact or diverting them to unproductive purposes. And the fear of the banks taking any concrete action for recovery is remote, thanks to the prevailing atmosphere in the agrarian field.
Why leave them out
Fourth, the scheme covers only crop loans, so farmers from the rain-fed areas who would have invested on constructing wells and pump sets would be discriminated against. These farmers have to pay loans out of crop yields only. Logically, the instalments and interest on such loans outstanding as on the December 31, 2007 should count for the waiver, as otherwise they too continue to be defaulters and would be ineligible for fresh loans.
Unwittingly the Government would be extending greater support to the farmers from the irrigated areas who do not make any investments on minor irrigation, causing injustice to the deserving farmers from the dry belt.
The real issues
Granting that no such scheme can be foolproof or satisfy all sections, the waiver is full of pitfalls and does not help solve the real issues for farmers or the sector. At best, the sop can provide some temporary respite.
Better alternative
Rs 60,000 crore is a sizeable amount of taxpayers’ money from a macro point of view. This could have been better utilised to bring in sustaining benefits. Even in terms of providing monetary relief to the affected, crop insurance schemes would be a better alternative. The money can be used to strengthen the insurance institutions and subsidise the premium. The crop losses can be compensated on a rational basis in case of insurance than an across-the-board and indiscriminate write-off.
Fallacy
It is also a fallacy to believe that credit or its waiver alone can mitigate the problems of the afflicted farmers. Timely availability of the right kind of fertilisers, genuine and quality seeds is very important. The marketing component of the chain is weak and the Government can improve the storage, transport and processing facilities of grains, fruits and vegetables and prevent distress sale of produce. It is well known that where the rural infrastructure is good, the plight of farmers reduce and productivity is better.
The waiver scheme smacks of populism and can’t revive agricultural production or provide sustainable relief to farmers.
Though statistically speaking 219 million tonnes of foodgrain production is a record, it is well known that production has reached a plateau, necessitating massive imports of food grains, pulses and edible oils. The prices of agro commodities have been rising,but are outpaced by the costs of cultivation. World over, the prices are rising and in the ultimate analysis the food security of the country is threatened.
Viewed in this context, no one can dispute that farming and farmers needed a stimulus. But is the loan waiver scheme the right kind of solution? Can the staggering outlay of Rs 60,000 crore help the agrarian economy and boost production? The measure may provide temporary relief, but don’t address the long-term issues.
Repayment culture
The farmers’ investment needs for the kharif’08 season are to be provided by the banks, helping them make a fresh start. It would be simplistic to assume that all would seek fresh credit or they would get it easily. The repayment culture gets badly impacted and it would be several years before some semblance of loan discipline can be restored. Given the surcharged and tense environment in the arena of loan recovery, the l waiver will only further vitiate the atmosphere.
To fulfil their mandatory obligations banks might implement the scheme of waiver and even may disburse fresh loans and oblige the gov
Too many flaws
From the farmers’ perspective too, the scheme has too many flaws. First, it sends a message to the honest borrowers, for the umpteenth time, that they have been unwise in repaying their loans. Second, the farmers who have invested their own resources or borrowed from money lenders, with no borrowings from the banks, stand to lose out. Third, the conscious and genuine farmers who have invested more of their savings than borrowings would be deprived of the benefit from this generous scheme.
An unintended lesson from the example will encourage farmers to borrow to the hilt from the banks, keeping their savings intact or diverting them to unproductive purposes. And the fear of the banks taking any concrete action for recovery is remote, thanks to the prevailing atmosphere in the agrarian field.
Why leave them out
Fourth, the scheme covers only crop loans, so farmers from the rain-fed areas who would have invested on constructing wells and pump sets would be discriminated against. These farmers have to pay loans out of crop yields only. Logically, the instalments and interest on such loans outstanding as on the December 31, 2007 should count for the waiver, as otherwise they too continue to be defaulters and would be ineligible for fresh loans.
Unwittingly the Government would be extending greater support to the farmers from the irrigated areas who do not make any investments on minor irrigation, causing injustice to the deserving farmers from the dry belt.
The real issues
Granting that no such scheme can be foolproof or satisfy all sections, the waiver is full of pitfalls and does not help solve the real issues for farmers or the sector. At best, the sop can provide some temporary respite.
Better alternative
Rs 60,000 crore is a sizeable amount of taxpayers’ money from a macro point of view. This could have been better utilised to bring in sustaining benefits. Even in terms of providing monetary relief to the affected, crop insurance schemes would be a better alternative. The money can be used to strengthen the insurance institutions and subsidise the premium. The crop losses can be compensated on a rational basis in case of insurance than an across-the-board and indiscriminate write-off.
Fallacy
It is also a fallacy to believe that credit or its waiver alone can mitigate the problems of the afflicted farmers. Timely availability of the right kind of fertilisers, genuine and quality seeds is very important. The marketing component of the chain is weak and the Government can improve the storage, transport and processing facilities of grains, fruits and vegetables and prevent distress sale of produce. It is well known that where the rural infrastructure is good, the plight of farmers reduce and productivity is better.
The waiver scheme smacks of populism and can’t revive agricultural production or provide sustainable relief to farmers.
