A recent Crisil research report has said that the top 50 stressed assets, which account for over half the total NPAs of ₹8 lakh crore, will require a haircut of 60 per cent (₹2.4 lakh crore) for debt to be pared to sustainable levels. This would perhaps exceed the farm loan waivers of all State governments. Yet, this ‘haircut’ has not evoked the sort of righteous outrage that farm loan waivers have. To be fair, it would be incorrect to entirely blame crony capitalism for this pile of NPAs; the financial crisis upset many a bonafide business plan. However, since then there have been any number of schemes to restructure corporate debt, backed by the RBI and the finance ministry. These efforts were perhaps necessary to keep a sluggish economy going.

So, why do policymakers such as the chief economic advisor and the RBI governor take a harsh view of farm loan waivers? According to reliable estimates, bad debts in agriculture account for less than 10 per cent of farm credit. That would be less than ₹2 lakh crore, even if cooperative banks’ lending were to be considered. Along with steps to boost farm income and cover for risks, a debt waiver is crucial, or else farmers will end up using their income to repay earlier loans, rather than begin on a fresh slate — which is what policymakers want both industry and banks to do. A loan waiver will benefit millions of poor farmers, against a ‘haircut’ helping a clutch of corporates.

It is hard to fathom why policy mandarins focus only on the ‘fiscal hazard’ of farm loan waivers, without taking a serious view on the cost of ‘bank recapitalisation’. Is it elitist bias? That explains why a ‘waiver’ is politely called a ‘haircut’ when industry’s debt burden is in question.

A Srinivas Senior Deputy Editor

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