Two separate decisions on farm loan waivers could have a domino effect
Chairing his first cabinet meeting after taking over the reins in Uttar Pradesh, Chief Minister Yogi Adityanath approved a write-off on outstanding farmer loans of up to Rs. 1 lakh taken before March 31, 2016. The State cabinet also decided to waive loans worth Rs. 6,000 crore extended to small and marginal farmers that had turned into non-performing assets. Together, this package, aimed at fulfilling the Bharatiya Janata Party’s election promise, will cost the exchequer about Rs. 36,000 crore. There was no mention of a bigger plan to ramp up the farm sector, in which U.P. invested just 2.3% of total expenditure in 2016-17 — one of the lowest rates across major States. A little earlier, the Madras High Court ordered the Tamil Nadu government to extend a similar farm loan waiver scheme for small farmers (with land holdings of up to 5 acres) and marginal farmers (who own up to 2.5 acres) to all farmers. Officials have even been forbidden from trying to recover loans where repayments have slipped. The State, which had already doled out Rs. 5,780 crore on this front, would need nearly Rs. 2,000 crore more to comply with the court’s order. This is a worrying trend for a country that wants to double agricultural incomes by 2022. Not only could it trigger a countrywide clamour for similar debt relief packages, political parties would also be more inclined to make such grand promises ahead of future polls. This is a slippery slope with multiple unintended outcomes likely in the years to come.
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