Varun Gandhi, BJP MP, believes that politics of farm loan waiver has a harmful impact, as it breeds “credit indiscipline” among farmers and leads to a “shortfall in rural credit growth.” Writing in The Hindu, Gandhi today explained why politics of agriculture loan waivers cannot continue for long. According to Gandhi, the introduction of country-wide farm loan waiver in 1990 had a “deleterious impact” on rural credit provision. It provided a “short-term palliative while breeding credit indiscipline among farmers.” This led to a “shortfall in rural credit growth.”
Gandhi said that just before 2009 General election, an agricultural loan waiver was sanctioned by the then UPA government. More recently, he wrote, loan waiver scheme of Uttar Pradesh government has been replicated by states like Maharashtra, Punjab, and Karnataka, while similar demands are growing in Madhya Pradesh, Rajasthan, and Haryana.
While noting that small and marginal farmers “deserve” support from the government, the BJP MP said, “India’s agricultural policy has historically disincentivized the creation of a formal credit culture among farmers.”
“When the next election is likely to bring about another farm loan waiver, why would any farmer seek to pay off his loans early? Such schemes can also prompt farmers to take on risky ventures that are beyond their capacity,” he added.
Gandhi said that small and marginal farmers may need another loan waiver, but this cannot continue in future. He suggested alternative measures, instead of loan waivers. These include more subsidies for the purchase of agricultural equipment, fertilizers, and pesticides, medical insurance to farmers and increasing the scope of MGNREGA.
Gandhi stressed that India needs a “national conversation on rural distress.” He said, “We ought to discuss the Swaminathan Commission’s report in a full week’s sitting of Parliament and decide which direction India’s agriculture goes.”