Loan waiver won’t root out farm distress, says NITI Aayog chief

Our Bureau New Delhi | Updated on December 19, 2018

NITI Aayog Vice-Chairman Rajiv Kumar   -  The Hindu

NITI Aayog says it runs counter to the principle of equality

Loan waiver is not the right policy to help farmers and it does not work on the principle of equality, NITI Aayog has said.

This remark comes at a time when the newly-elected Congress government in Madhya Pradesh has announced waiver of loans up to ₹2 lakh, which is likely to cover 40 lakh farmers. Similarly, the just-elected Congress government in Chhattisgarh has decided to waive loans amounting to ₹6,100 crore, benefiting 16 lakh farmers.


Upping the political ante, Congress President Rahul Gandhi is now pushing for a nation-wide waiver and has made it clear that this will be the key issue during the 2019 Lok Sabha elections.

‘Only a palliative’

Farm-loan waiver is not a solution to farm sector distress, but only a palliative, NITI Aayog Vice-Chairman Rajiv Kumar told reporters on Wednesday, releasing a ‘Strategy for New India@75’.



“Farm-loan waiver is not the right policy. It does not reach the right people,” added Ramesh Chand, Member, NITI Aayog. Since the scheme covers farmers and not cultivators, not more than 40 per cent of the needy would get the benefit. Most of the lending under the head agriculture loan is being used for consumption. More importantly, small and marginal farmers would not benefit from this, he said.

When asked about the waiver scheme in Madhya Pradesh, Chand said as per his estimate, not more than 25 per cent of the farmers will benefit. The previous government used to provide interest subvention that helped farmers get interest-free loan, if they repaid on time. This brought discipline, he said, while expressing the fear that this would get affected.

He suggested that rather than spending on farm-loan waiver, efforts should be made to ensure that the benefit of the minimum support price reached the farmers.

Commenting on the speculation on the farm loan front at the national level, Chand said that if the waiver happens, “it will be done in a diluted manner and that too with many riders.”

These conditions could be waiver for one out of four loans, not for September but for March only, only to cover farmers and not cultivators, etc.

He claimed that the last nation-wide loan waiver scheme too came with many caveats, a reason why it did not benefit many. The last wavier in 2008-09 cost the exchequer over ₹50,000 crore.

Though the Central government has so far maintained that there is no plan for a nation-wide loan waiver, three BJP-ruled States (Maharashtra, Uttar Pradesh and Assam) have decided to go for the waiver. The party has also promised to write off farm loans in Odisha, if it comes to power.

Experts feel that such a waiver will certainly have an impact on the exchequer, though the effects can be managed.

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Published on December 19, 2018

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