Presenting the state budget in Assembly, Rajasthan Chief Minister Vasundhara Raje on Monday announced one-time loan waiver of Rs 50,000 for small and marginal farmers in the state, costing the exchequer whopping Rs 8,000 crore. The Bharatiya Janata Party (BJP) ruled Rajasthan is supposed to go to the polls by December this year. In addition, the government also announced a farmer loan relief commission for the farmers where they can present their side to get relief on merit basis. Notably, Rajasthan is expecting a fiscal deficit of Rs 280 billion in 2018-19. Interestingly, the other BJP-ruled state Madhya Pradesh is not too far behind in terms of offering the sops to the farmers. Madhya Pradesh too is going to polls in December. While Rajasthan has announced a loan-waiver, Shivraj Singh Chauhan, Chief Minister of Madhya Pradesh has issued a bonus of Rs 200 per quintal over the minimum support price (MSP) to the wheat and paddy farmers in the state.
Amusingly, there was no mention of ‘loan-waiver’ in the entire union budget 2018 speech by Finance Minister Arun Jaitley on February 1. Nevertheless, the central government announced fixing the MSP at 1.5 times of input or production cost. “I am pleased to announce that as per pre-determined principle, government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost. I am confident that this historic decision will prove an important step towards doubling the income of our farmers,” Arun Jaitley said in his budget speech.
This announcement even disappointed farming community in different states, various media reports said. Several economists have routinely said that farm loan waiver is just a temporary solution to the distress that the farming community is facing at present. With the central government not adopting this route to alleviate problems of the farmers, it can be assumed that it’s not in support of loan-waiver route. However, when poll bound states administered by same ruling party that is leading the NDA combine at the centre gives into the populist loan waiver route, the understanding becomes hazy. RBI has routinely noted farm loan waiver as one of the several factors that threaten to quicken inflation in the near term and adversely add to fiscal distress in the long-term.
Congress members led by the leader of opposition Rameshwar Dudi did create an uproar in the house, but sadly it was over their demand of complete loan waiver not being met. Similar to the ruling government, they too were playing the politics of votes totally ignoring the fact that the state is already fiscally overstretched. “Vasundhara Raje’s decision was betrayal with farmers and complete loan should be waived,” PTI reported them as saying.