How farm loan waivers are doing more harm than good?

For a long time now, India has been reeling under an agrarian crisis. Low productivity, crop failures, meagre earnings are the common features of the agricultural economy. Earlier this month, thousands of farmers marched through the streets of National Capital. The discontented farmers demanded loan waivers and better prices for their products. Farmers in India, mainly own small fragments of lands and due to high input cost and low output, it becomes arduous for them to survive. Besides, crop failures and measly prices exacerbate their situation; with no money for the next crop they take loans. Meagre incomes and inability to pay back lead to demands for farm loan waivers. Every year, farmers come out on the streets and demand waivers. This year’s protests were not so uncommon viewing their history.

These protests evidently express the deplorable conditions of the farmers. This clearly exhibits that the dispensations at the centre and the state are not doing enough to tackle the agrarian crisis. The governments of the country have the tendency to follow short-term measures like farm loan waivers to placate the farmers but these appeasement packages are taking a heavy toll on the economy. Loan waivers put a lot of strain on the fiscal deficit which is on the rise and needs to be contained. Since loan waivers are one-way transactions; they could be taken as a liability on the part of the government. Now, the larger question is, in spite of being so fashionable, are these waivers helpful in the long run?

The share of agriculture in the economy is decreasing rapidly. There is a big mismatch between the employment agriculture provides and its contribution to GDP. According to the economic survey, 2017-18, the agricultural sector employs almost 50 percent of total workforce in India and contributes just 16 percent to the country’s GDP. The above data clearly shows the number of people employed in the agricultural sector is far more than the sector can actually sustain, leading to a problem of disguised employment. That signifies, farm loan waivers are not going to help in the long but they are merely going to provide respite for the time being.

Hence, there is a need to bring about structural reforms in agriculture, simultaneously cutting down on waivers will unburden the economy. This could be done in numerous ways such as setting up of Farmer Producers Organisations (FPOs) and Mega food Parks, farming according to the agro-climatic zones- will help in the use of resources efficiently, the introduction of new complementary industries like biofuel industries, crop diversification and strengthening of backward and forward linkages.

The basic problem farmers face is the lack of market for their produce and abundance of middlemen in the market. There is a need to provide them a secure and free market. The government’s new initiative- e-NAM (an online platform for agricultural produce) can be a way forward. This is a crucial time to bring the reforms to unburden the farmers and secure food security for future generations.

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