The editorial ‘’Beyond waivers’’ (December 18) was apt. It is sad the promise of loan waivers has become a tool for political parties to win elections. The recent win in three states by the Congress on the promise to waive farm loans has serious ramifications for the future. Political parties with only short-term vision will use the ploy of loan waivers in their election manifestos. Over the past decade, we have seen various governments at the state and the central level pointing at waving off farm loans. Has it helped the farmers? All it has done is spoil the credit culture. An honest farmer who has been diligently repaying his loans will feel short-changed when he sees others getting their loans written off. These mass waivers are sowing the seeds for more non-performing assets in banks.
When parties put farm loan waivers as part of their election manifestos, they are silent as to where they will get the money to fund the waivers. There is no budget for farm waivers. Money earmarked for other farm-related improvements will be forced to be diverted to fund the farm loan waivers. The net result will be continuing lack of infrastructure at the rural level and the vicious cycle of farmer distress will continue.
It has been reported that a group of economists, which includes the former governor of Reserve Bank of India (RBI) Raghuram Rajan and International Monetary Fund Chief Economist Gita Gopinath, has written to political establishments to desist from populist measures like farm loan waivers. During his tenure as the RBI governor, Rajan had written to the Election Commission (EC) to take the farm loan waiver off the table. The visionary that Rajan was, he would have foreseen how political parties with short-term vision would try to game the system. With the national elections on the horizon, loan waivers as an election winning formula will gain currency.
If the EC cannot force political parties to jettison farm loan waivers from their manifestos, they should be asked to clearly spell out the source of funds from which the proposed farm loan waivers would be funded. If the party promising farm loan waiver funds it from the party funds, then it could be accepted. But on no account should the state exchequer be used to fund poll promises.
K V Premraj Mumbai
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