Jaitley Rules Out Farmer Loan Waivers, Says If States Have Resources, They Can Go Ahead

Standing tall against all the pressure from ‘drought-hit’ states seeking loan waivers, Centre puts its foot down and nods in disapproval. In the face of a situation where many a states had begun to contend for the loan waiver from the centre, Finance Minister Arun Jaitley ruled out loan waivers completely and clarified that no state will be chosen over the other.

"If a state has its own resources and want to go ahead in that direction, it will have to find its resources. The situation where the centre will help one state and not the others will not arise," Jaitley said in the Rajya Sabha, adding that the centre will continue to provide the support that it does through the policies which are already in place.

Loan waivers in the name of voter appeasement have cost the ex-chequer a mighty deal in the past what with the UPA government’ s 2008 loan waiver costing a whopping Rs 70,000 crore. If two decades later, nothing seems to have changed, then appealing for loan waivers and demanding that this government follow in the footsteps of the previous one, should be the last thing the opposition should lend its voice to.

India needs an exit policy for unviable farmers and farming, not indefinite life support for them to stay in comatose conditions forever.

A more fundamental rethink is required by political parties and economists on the viability of farming in large parts of India. Consider these arguments:

One, no sector of the economy gets subsidies on inputs (power, diesel, water, fertiliser, seeds, loans) as well as output (minimum support prices) like farming does. If farming is still unviable, economic strategies should be focused on getting people off farms and into industry and services in semi-urban and urban areas.

Two, excess subsidisation of farms is actually leading to uneconomic land use. When the need of the hour is mechanisation and more commercial or large-scale farming, subsidies actually lock poor farmers into small farms. It prevents them from cashing out and finding their fortunes elsewhere. Subsidies also result in overuse of cheap fertilisers and degradation of soil, and wastage of water (and power and diesel) in producing water-guzzling crops like sugarcane or rice.

Three, efficient use of land can be ensured and jobs created with greater urbanisation, and not by the retention of underemployed workers in farms and rural areas. Even socially, if you want to defeat the scourge of casteism, urbanisation is the answer, as Babasaheb Ambedkar had maintained.

Four, our politicians are also living in la-la land in believing that the farm vote is forever. India is 32 per cent urban, and a World Bank study says that another 20 per cent of Indians live in places that are not categorised as urban, but hold urban-like features and expectations. This is where investment needs to go, not to keeping sub-optimal farmers in business through regular farm loan waivers.

The call for repeated farm waivers is a sign that farmers need to get out of farming when they can. It is the government’s duty to aid this change, not retard it. Politicians should stop pandering to a diminishing vote bank. Jaitley has taken the right decision not to give in to states’ pressure.