The one–time loan waiver of a whopping Rs. 60,000 crores to help an estimated 40 million farmers is definetly a good development for Indian farming sector. The purpose of writing this article is that, while reading the news papers, I came across many people talking insignificant things and only a small section of the people really addressing the ‘true’ pros and cons. Here I would like to express my take on pros and cons of this so-called ‘mother of all waivers’. Even though this loan-waiver would definitely provide some relief to the estimated 40 million small and marginal farmers, a better package would have been the increase of Minimum Support Price for all the crops and providing subsidies for inputs so that farming in general becomes profitable.

Pros -

First of all, farmers in India are in distress and considering their loss in farming over the years, any kind of help to these farmers would be useful to them. The claim by some people that even the ‘private lender’ loans  should also be cleared is not possible for the simple reason that there is no reasonable and fair way to identify and account for such private loans.  Also, the other opinion raised was that it would be better if the governments pay some money to the farmers on monthly basis for 2-3 months to provide a kind of financial cushion. It would be practically impossible to raise such huge sums of money without increasing the taxes on the other sections. Another important thing is that in the current loan-waiver scheme fair records are available for farmer’s loans and since it only waives the loans of small and marginal farmers, it has higher probability of reaching the poor directly than any other scheme, which involves money flow through government’s bureaucracy. Waiving the loans issued by the banks is an easy option, as the banks will not insist on immediate repayment, and most likely all that the governments have to do is write bonds for the loan-waiver amount and repay them later. As far as the impact of this waiver on the banks is concerned, I don’t imagine these small and marginal farmers repaying their loans in the near future with the current agricultural practice. In case the government has not decided to pay back these loans, banks would have paid from their own pockets. However, the major advantage is that the small and marginal farmers can get new loans again now.

Cons -

 “Give me the fish and I eat for a day. Teach me to fish and I eat for a lifetime”

This quotation is very apt in this particular instance where government is not looking for a permanent solution to farmer’s crisis. A better solution would have been spending a portion of this amount on developing their infrastructure –providing them with better education, providing quality inputs (water, seeds and fertilizers), setting up food storage facilities and increasing the minimum support price would make farming more economical and help farmers to stand on their own feet. I do support the increase of Minimum Support Price for wheat and rice, but still it is very unfortunate that the government which came to power on ‘AAM ADMI’ plank has done very little on these aspects over their four year term. Subsidies do give temporary relief but they must be properly supported with proper infrastructure facilities to permanently stop farmer’s misery.