Farm loan waivers to be 2% of GDP by 2019

Farm loan waivers will amount to 2% of GDP by 2019 polls as other states may follow BJP’s Maharashtra and UP governments, says a Bank of America Merrill Lynch report.

“We expect almost all States to write off about $40 billion of farm loans in the run up to the 2019 general elections following the ruling BJP’s UP and Maharashtra governments’ waivers,” BofAML said in a research note.

This covers bank loans to farmers with up to five acres of land. The report said the Ministry of Finance will have to fund farm loan waivers by UDAY-type bonds to limit market impact.

On Saturday, the Maharashtra government waived loans of Rs 300 billion/0.2% of GDP owed by farmers with up to five acres of land by October.

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