Hours after taking oath of office on Monday, 17 December, Madhya Pradesh Chief Minister Kamal Nath cleared the proposal of waiving farm loans up to Rs 2 lakh as promised by Congress President Rahul Gandhi ahead of assembly polls.
On the same day, Nath's counterpart in Chhattisgarh – Bhupesh Baghel made similar announcements saying, "Short-term agriculture loans to the tune of over Rs 6,100 crore of over 16.65 lakh farmers drawn from cooperative banks and Chhattisgarh Gramin Banks, as on 30 November, 2018 will be completely waived."
Political analysts have largely attributed loan waiver promises of Congress party to its victory in the recent Assembly elections. This “waiver fever” has now gripped ahead of the 2019 General Polls, as Bhartiya Janata Party cleared farm loans in its ruling states of Gujarat and Assam.
Economists have also argued that the waiver puts pressure economy as it should should not form part of poll promises.
Talking to BloombergQuint's Tamanna Inamdar, Soumya Khanti Ghosh, Chief Economic Advisor to State Bank of India said, loan waiver at the end of day is short-term band-aid. “In the long run, the issue of proper market of agriculture production needs to be addressed,” Ghosh says.
“We have address the issue of why farmers are not being able to get the proper market for their produce. These are the reforms we need to strive in the next couple of years. Therefore, we are giving debt waiver and the money is compensated by the states to the bank.”Soumya Khanti Ghosh, Chief Economic Advisor to SBI
Speaking on the economic effects of loan waiver, Congress spokesperson, Vinayak Dalmia said that the party acknowledges the agrarian distress and its economic impacts. Dalmia further added that the country's heart lies with the agrarian sector, therefore, “uplifting this sector” is imperative.
“The farm economy is still India’s heartbeat and its soul. Not only it (loan waiver) is good politics but it is good economics because it creates employment. It creates a prosperous farm economy which helps everybody.”Vinayak Dalmia, Congress spokesperson
But as the pressure mounts on the BJP at the centre for a national-level waiver on farm loans which was earlier denied by Finance Minister Arun Jaitley, BJP spokesperson Narendra Taneja said that the centre's priority remains improving the infrastructure which "had been in a very bad shape" before the NDA came to power.
“We are looking at the rural economy as a whole... We realised that we need to transform rural economy’s infrastructure which was neglected for decades. Most villages were not connected, there was no electricity, irrigation was in a very bad shape and 77 percent farmers didn’t even have a bank account. We started fixing those things.”Narendra Taneja, BJP spokesperson
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