The Narendra Modi government has been mulling over several alternatives to farm loan waivers to provide some relief to the ailing agricultural sector ahead of the Lok Sabha elections.
The Narendra Modi government has been mulling over several alternatives to farm loan waivers to provide some relief to the ailing agricultural sector ahead of the Lok Sabha elections. The government arguably swung into action after the recent drubbing faced by the Bharatiya Janata Party (BJP) in three heartland states.
According to media reports, the government is considering a few options to help ailing farmers, including direct cash transfer of Rs 3,000-4,000 per acre and extending crop loans at zero per cent. Since the budget this year will be an interim budget, experts welcomed efforts to help farmers but said that there is little room to announce big bang expenditure plans. However, there are ways in which these alternatives can be accommodated.
On direct cash transfer to farmers, Chief Economist of Care Ratings Madan Sabnavis said, “This looks good on paper…what can be done is that a small part can come in this budget and the rest spread out over a time frame.”
He said that the government, so far, has been prudent with the FRBM targets and hence will not let deficit go upwards. “It can reallocate money from other schemes to manage some part of this scheme,” he added. Fiscal Responsibility and Budget Management (FRBM) was enacted in 2003 to move towards a fiscally prudent government budget.
However, the major challenge before the government would be to maintain fiscal discipline, which, at present, looks less feasible. “This is because fiscal deficit figures in the first two quarters have exceeded 95% of the total targeted deficit for the whole fiscal year 2018-19,” said Sridhar Kundu of Centre for Budget and Governance Accountability (CBGA).
“Though this deficit may become narrower with the escalations of the tax collection at the end of the fiscal year, it would restrict the government to step into any expansionary measures,” he added.
However, implementing zero-rated farm loan may be off-budget and may not impact the fiscal maths, Sridhar Kundu explained.
On being asked if these schemes are populist measures for the upcoming election, both experts were of the opinion that any step being taken to help the farmers, at this point, should be appreciated.