Prevention better than cure: RBI on farm loan waivers

Says there is a sharp negative correlation between agricultural growth and farmer suicides

Pitching for growth in agriculture sector to check farmer suicides, RBI Deputy Governor H R Khan today said debt burden is not the only reason for such tragic steps even as he warned against frequent farm loan waivers.

"Prevention is better than cure," Khan said, while adding there are occasions where loan waivers are needed, but in the long term it is important to ensure that such problems do not reoccur.

In a speech at the 34th Foundation Day of Nabard, Khan said there is an inverse relationship between agricultural growth and the suicides committed by farmers.

"There is a sharp negative correlation between agricultural growth and farmer suicides. It is almost 0.72 per cent... When growth is there, (number of) suicides is less."

Khan also said that the suicide case of Gajendra Singh Rathore at a politically rally in Delhi suggests that the problem still remains in the agriculture sector and many people have suggested structural transformation of the sector.

Besides indebtedness, there are other reasons like crop failures, social, cultural, ecological factors which have led to farmer suicides, he said quoting various studies conducted in this regard.

Khan said the focus has largely been on agricultural production and not much importance has been given to increase the income of the farmers.

"The 70th round of the NSS says that an average farmer earns Rs 6,400 a month and if we take out his expenses and consumption needs, he is left with a surplus of a paltry Rs 200 a month. So how is he going to service a loan which is an average of Rs 47,00 per month," Khan said.

He said credit to the agriculture sector has expanded exponentially in recent years but there are several areas of weakness in terms of geographical spread and in terms of class of agriculturists covered.