Is farm loan waiver good or bad

Although loan waive-offs will undermine credit discipline, the agricultural loan waiver program is helpful to many and gives farmers some solace at a time when farmer suicides are on the rise.

Every political party makes a farm loan forgiveness promise as elections are approaching.

In 1990, the first agricultural debt relief program went into effect. Then, farm loans totaling Rs. 10,000 crores were canceled. Since then, other countries have introduced loan exemptions.

India’s crop yields are heavily reliant on the monsoon season. By taking out loans, farmers massively invest in their crops. Farmers will become indebted if the crop fails due to a lack of precipitation or a lack of market demand. In India, farmer suicides are rising. So, waiving farm loans is a wise move.

Farm loan waivers, however, are Bad Politics since they frequently happen right before elections to turn out voters.

Is farm loan waiver a good scheme?

Many farmers are forced into a debt cycle by taking out high-interest loans from unregulated moneylenders. Farm loan waiver programs will encourage these farmers to take out bank loans instead.

India now offers few viable career options in agriculture. A serious food shortage will result if this situation persists. Government must win the trust of farmers if it is to avert this disaster. A farm loan forgiveness program does that.

Some claim that the farmers are being helped out with public money, which amounts to taking someone else’s money and giving it to someone else. We must not overlook the indirect taxes that farmers pay when they purchase goods, machinery, etc.

Where does the scheme lack?

Loan waiver programs erode the value of good credit. While they wait for the next loan waiver program, farmers will start intentionally defaulting on their loans, which is bad for the economy. As a result, banks are experiencing an increase in problematic loans. Additionally, banks are also burdened by the process of waiving debts. Farms may be forced to turn to local money lenders as a result of banks enforcing stricter guidelines for making loans to farmers.

Government should focus on the underlying causes of issues rather than simply eradicating debt each time, which includes enhancing the agricultural sector and raising farmers’ incomes through the provision of better infrastructure, better seeds, and better technologies, among other things.

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