Loan waiver for farmers – Good or Bad?

Loan waiver for farmers - Good or Bad?

Theme :-

  • Uttar Pradesh government waives farm loans worth Rs. 36,000 crores in April 2017.
  • Tamil Nadu also decided to waive loans for farmers.
  • Several other states including AP, Telangana & Maharastra have pressure to follow the same.

Good :-

  • In India, results of crops highly depend on monsoons. Farmers invest heavily on crops by taking loans. If the crop fails due to lack of rains or insufficient market demand, farmers will get trapped in debt. Farmer suicides are increasing in India. So, it’s a good step to waive farm loans.
  • Many farmers borrow money from unofficial moneylenders for high interest rates and get trapped in vicious cycle of debt. Farm loan waiver schemes will divert these farmers to borrow money from banks.
  • Agriculture in India is not a good career option yet. Many farmers are leave farming, if they find alternatives. If this situation continues, there will be a severe food scarcity. To prevent this situation, government need to gain the trust of farmers. Farm loan waiver scheme does that.

Bad :-

  • Loan waiver schemes disrupts credit discipline. Farmers will turn into willful defaulters as they wait for the next loan waiver scheme, which is bad for economy.
  • This scheme indirectly punishes loan repayers. Those who repaid loan before the announcement of the scheme are at loss.
  • Those who didn’t repay loans, even if they afford to are at benefit. But here, taxpayers are at loss, because loans will be waived with taxpayers’ money.
  • Instead of loan waiver scheme, it will much better if government improves the crop insurance scheme, educates farmers about the market trends, increases the Minimum Support Price (MSP).
  • Banks may brand farm loans as bad loans and they may implement stricter rules to lend money to farmers.
  • Rich farmers too may take loans even if there is no need, in the hope of the next loan waiver scheme. This will impact the farmers who are genuinely in need of loans.
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Facts :-

  • Agricultural debt waiver scheme was first implemented in 2008 under UPA government. Then, Rs.60,000 crore worth farm loans were waived off.

Conclusion :-

Though loan waive offs will disrupt credit discipline, farm loan waiver scheme is beneficial to many. Amid the increasing farmer suicides, loan waiver scheme provides relief for many families and encourages them to invest in the next crop. This in turn benefits India’s food security as well. But care must be taken to weed out the willful defaulters from the scheme and to provide incentives to those who repaid the loans.

Your Turn…

What is your opinion on loan waiver scheme for farmers? Express your thoughts in the comment section below.

Photo Credits: DARSHAN SIMHA via Flickr, under CC 2.0.

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  1. Farm Loan it’s good but farmers have to change their mentality, those have capacity to repay ,they should make repayment don’t wait for next announcement of Loan waive

  2. Well friends
    As we know india is well known about its agriculture. India has its important for exporting many good variety to other countries.
    But since two decade production of crop becomes slow. Quality of crops is not being good. As farmers are working day and night in theire fields. Its becouse of radical change of mansoon. It is also affected by lack of facilities in agriculture fields because of money. An other reason is also affecting economy of farmers govt low rate MSP from the farmers.
    If we really improve the conditions of our farmers we should give them subsidy give them crop insurence on highrate, give them latest technology,soil test and also loan wave off scheme for small farmers. This solution strong not only farmers but also support strong economy.

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