Farm loan waivers don't address underlying causes of farmer distress: Paper

While loan waivers might offer short-term relief to farmers, they do not address the underlying causes of distress, which are income volatility and production risk.

  This further strengthens the case for more targeted, risk-reducing policy responses, a recent research paper titled Beyond Loan Waivers: Empirical Evidence from Punjab, Maharashtra and Uttar Pradesh said.

 

The paper, authored by economist Shweta Saini and former agriculture secretary Siraj Hussain, was published in the Agricultural Economics Research Review, a SAGE Journals publication.

 

The paper is based on a farmer survey of 2,838 farmers in Punjab, Maharashtra and Uttar Pradesh. The dataset is from an earlier study titled Farm Loan Waivers in India: Assessing Impact and Looking Ahead, published and supported by Nabard.

 

Employing multiple correspondence analysis, a Farmer Distress Index (FDI) and a Coping Mechanism Index are constructed to quantify key stressors and assess response strategies.

 

The paper said the study reveals that income fluctuations, crop and livestock losses, and rising capital costs are among the most significant drivers of distress for farmers, with small and marginal farmers disproportionately affected.

 

While coping mechanisms, ranging from income diversification to improved access to institutional credit, are widely used, their effectiveness in mitigating distress is uneven.

 

The paper said farm loan waivers were associated with higher levels of distress, indicating a perhaps limited long-term impact, whereas crop insurance was linked to lower distress, though it remains underutilised.

 

The study concluded that addressing farmer distress requires a shift from reactive, short-term relief measures to comprehensive, structural interventions that enhance resilience, financial inclusion and institutional effectiveness.

The Centre today said it has ensured record availability of fertilisers for farmers during the year 2024–25 to meet their agricultural needs in a timely manner. In a statement, it said that in FY25, as against the national requirement of 152.50 crore bags (72.20 million tonnes) of fertilisers, the government ensured a total availability of around 176.79 crore bags (83.46 million tonnes).