Farm loan Waiver.
Since Independence, one of the primary objectives of India’s agricultural policy has been to improve farmers’ access to institutional credit and reduce their dependence on informal credit.
Steps taken by Government to formalise credit for farmers –
- Nationalisation of commercial banks,
- Establishment of Regional Rural Banks,
- Establishment of National Bank for Agriculture and Rural Development (NABARD).
- Launching of schemes like – Kisan Credit Card scheme in 1998, the Agricultural Debt Waiver and Debt Relief Scheme in 2008, the Interest Subvention Scheme in 2010-11, and the Pradhan Mantri Jan-Dhan Yojana in 2014.
Result of the above measures –
The result is that the share of institutional credit to agricultural gross domestic product has increased from 10% in 1999-2000 to nearly 41% in 2015-16.
Ground reality –
- A recent study by the International Food Policy Research Institute reveals that at the national level, 48% of agricultural households do not avail a loan from any source.
- Among the borrowing households, 36% take credit from informal sources, especially from moneylenders who charge exorbitant rates of interest in the 25%-70% range per annum.
Significance of institutional farm credit –
- A negative relationship between the size of farm and per capita consumption expenditure (a proxy for income) further underscores the importance of formal credit in assisting marginal and poor farm households in reducing poverty.
- Access to formal institutional credit also tends to enhance farmers’ risk-bearing ability and may induce them to take up risky ventures and investments that could yield higher incomes.
A case against loan waivers –
- As a major proportion of farmers remain outside the ambit of a policy of a subsidised rate of interest, and, for that matter, of loan waiver schemes announced by respective State governments.
- Second, the loan waivers may provide instant temporary relief from debt but largely fails to contribute to farmers’ welfare in the long run. It is observed that farmers’ loan requirement is for non-agricultural purposes as well. Government’s should make sincere efforts to protect them from incessant natural disasters and price volatility through crop insurance and better marketing systems.
- Third, it should be understood that writing off loans would not only put pressure on already constrained fiscal resources but also bring in the challenge of identifying eligible beneficiaries and distributing the amount. Farm loan Waiver
- The report of the Committee on Doubling of Farmers’ Income, Ministry of Agriculture and Farmers Welfare, has rightly suggested accelerating investments in agriculture research and technology, irrigation and rural energy, with a concerted focus in the less developed eastern and rain-fed States for faster increase in crop productivity and rural poverty reduction.
A diversion of money towards Farm loan Waiver, which is in fact unproductive, will adversely impinge on state finances, may dissuade lending by the banks, and hence prove counterproductive to the government’s broader mandate of doubling farmers’ income by 2022-23. A section of agricultural researchers argue that widening the net of institutional farm credit serves the twin purpose of providing a safety cushion against agricultural uncertainties as well as identification of potential beneficiaries of debt waiver schemes. Discuss.
Q- A section of agricultural researchers argue that widening the net of institutional farm credit serves the twin purpose of providing a safety cushion against agricultural uncertainties as well as identification of potential beneficiaries of debt waiver schemes. Discuss.