Hours after swearing-in as chief minister of Karnataka BS Yeddyurappa announced a farm loan waiver to the tune of Rs 1 lakh as his first decision. The decision was taken in the first Cabinet meeting chaired by BS Yeddyurappa even as the Bharatiya Janata Party (BJP) is yet to prove majority.
Amid the intense agrarian crisis, farm loan waivers are popular political move, which experts see merely as a ‘quick-fix’. Speaking with FE Online recently Sameer Narang, Chief Economist, Bank of Baroda said that farm loan waivers help, but temporarily. Moreover, it affects the credit system in the country.
The latest RBI data showed that outstanding bank advances to agriculture and allied activities have risen from about 13% of GDP in 2000-01 to around 53% in 2016-17. RBI governor Urjit Patel said that there was the risk of domino effect, which means that one event sets off a chain of similar events.
The agrarian crisis in Karnataka is severe. Over 35,000 farmers committed suicide between April 2013 and November 2017, of which nearly 2,500 were suffering from crop failure and drought. The number of farmers’ suicide in Karnataka was second highest after Maharashtra, according to NCRB data.
Last year too, the Congress government in Karnataka announced loan waivers, joining the Uttar Pradesh, Punjab, Maharashtra, Rajasthan. Ind-Ra calculated that the farm loan waivers announced by these five states together will widen the combined fiscal deficit by Rs 1,07,700 crore or 0.65% of GDP this financial year. What experts say is that there is a need to have other solutions such as giving income support and providing insurance cover to crop failure.
Other policies of the government such as eNAM, the Pradhan Mantri Fasal Bima Yojana (insurance), the Pradhan Mantri Krishi Sinchai Yojana (irrigation) and the Paramparagat Krishi Vikas Yojana are good policies which, if implemented properly and inclusively, could help the distressed agriculture sector.
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