One of the carrots the Congress dangles before the Gujarat voter for the upcoming Assembly elections is a farm loan waiver—Congress vice-president Rahul Gandhi, campaigning for the party, said that a Congress government in the state will announce a waiver within 10 days of assuming charge. While Gujarat had witnessed stellar agricultural growth between 2010 and 2014, things haven’t been as rosy in the last couple of years—FY15 and FY16 agri-GVA saw a contraction—and falling prices of cash crops have left the state’s farmers bitter. Cotton, which had in the last decade or so powered agri-growth in the state, is losing steam. Farmers had begun shifting to groundnut in a big way but even groundnut prices have crashed. Thus, a loan waiver would seem quite attractive, and Congress has beaten the incumbent BJP to this particular tool of populist politicking. But the BJP has only itself to blame. In the past few state elections, it has swore by big-ticket waivers to rake in votes, making competitive waiver politics the norm.
But, voters need to realise that a farm loan waiver will not address farmers’ issues meaningfully. For instance, expanding irrigation—and Gujarat has done very well in the past on this front—addresses the problem of deficient rainfall that has affected crops in the past couple of years, not one-time loan waivers. More than 50% of the state’s cultivated area doesn’t have access to irrigation. One estimate puts the loan waiver’s cost to the exchequer at over `30,000 crore. Given large and medium farmers account for the bulk of the agri-loans extended, though they make up barely a third of the farmer population in the state, a waiver will benefit them the most. On the other hand, if the `30,000 crore were to be invested in developing irrigation or promoting farm mechanisation and agri-extension services, the benefits are likely to be more evenly spread. Gujarat voters would do well to understand that there are very few gains from a waiver, and for a very few among them, no matter how attractive it may seem.