JOIN USPrime Minister Narendra Modi has made it clear to the states that the Centre is against farm loan waivers.
Recalling his own experience, Modi is believed to have said that loan waivers suck farmers into a vicious cycle of banking mess, besides being bad economics.
A Union minister privy to Modi’s stand said, states, even those ruled by the BJP, are free to provide succour to farmers if they have money, but should not expect any financial backing on the issue, which otherwise is populist.
With Uttar Pradesh Chief Minister Yogi Adityanath waiving off Rs 36,000 crore worth agricultural loans to keep up the BJP’s poll promise, other states — Maharashtra, Punjab and Tamil Nadu — are also under pressure to follow suit.
The prime minister’s view is shared by Chief Economic Adviser Arvind Subramanian, who expressed his concern during a recent interaction in Washington. Subramanian said that the farm loan waiver move, if adopted by other states, could increase the deficit by 2% of the GDP. He also insisted that it poses a huge challenge to government’s fiscal consolidation measures.
Modi’s own study of writing off loans was that banks and other lending institutions disqualify eligible from reaping benefits, while the ineligible manage to get part or whole debt relief waiver.