Waiver politics

Populist states will have to either avoid paying banks or slash capex

Pressure is growing on state governments to step up and waive agricultural loans ahead of the Lok Sabha elections, scheduled for early 2019. Congress President Rahul Gandhi’s assertion that he would not allow the prime minister to sleep till farm loans are waived in all states is plain irresponsible. The Bharatiya Janata Party isn’t far behind. Finance Minister Arun Jaitley’s suggestion (in an interview to this newspaper last week) that states “that can afford it” should go ahead with loan waivers can only be seen as playing to the gallery. Such loan waivers cause distortions up and down the chain