Gujarat Assembly Election 2017: Politics over farm loan waivers will only harm agriculture in the state

If the buzz from the trenches in Gujarat is to be believed, Congress is going to announce a waiver of farm loans ahead of the Gujarat polls. The signs were always there: Congress has time and again criticised the BJP led central government for being anti-farmer.

Rahul Gandhi has been particularly evocative when he compared the plight of the farmers with that of the corporate defaulters. He has cleverly pivoted on the accounting write-off of loans to certain corporate houses by banks to create a stir amongst indebted farmers. Congress has in fact gone ahead and distributed pamphlets and flyers promising a farm loan waiver ahead of its manifesto release. The manifesto drafting exercise, with Sam Pitroda lending his name to it, seems more like an afterthought now, given that Congress has already decided on the course of action it is going to take.

Representational image. Reuters

Representational image. Reuters

This is not the first election where Congress has pitched a waiver to farmers. In UP elections, realising that there were massive loan defaults by farmers, Congress evoked the farm loan waiver of 2008-2009 and promised a repeat of the same if elected. In fact, this promise received so much traction on the ground that BJP was forced to promise the same and implement it after coming to power with significant cost to the exchequer. However, the UP farm loan waiver was not only politically expedient but also a necessity, given that most of the farmers who received the benefit of the loan waiver would not have been able to repay their loans. Two previous governments (BSP first and SP then) had focused heavily on large-scale infrastructure projects to the detriment of the agriculture sector.

The low penetration of agriculture insurance schemes, absence of formal credit systems and increase in number of farmer suicides due to indebtedness all contributed to the demand of loan waivers. A loan waiver would have given the farmers of the state a clean slate but wouldn’t have been enough to revive the agricultural sector. Therefore, the BJP, in a masterstroke, combined the promise of farm loan waiver with a number of institutional changes like guaranteed payment cycles for wheat farmers, compulsory purchase of paddy harvests, free crop insurance for small and marginal farmers, free energy efficient water pumps for farmers, guaranteed electricity for agricultural purposes, increasing the number of cold storages, and reform of the APMC system. All these factors combined signalled to the voters that systemic changes will be initiated to revive the farm sector.

The situation in Gujarat is quite different though. Unlike UP, Gujarat’s farm sector has been doing well. The outstanding loans are not desperate attempts by the farmers here to keep their heads above the water but have been taken for purchasing machinery, diversification into allied activities etc. The penetration of insurance schemes and irrigation projects is significantly better than in UP. The APMC infrastructure, rural electrification and rural road network all serve to give the Gujarati farmer an advantage over the farmer in UP.

While it is true that farming-related income has been on the decline, a farm loan waiver is not the answer. A farm loan waiver in Gujarat will cost the exchequer close to Rs 30,000 crore and will largely benefit large farmers with average loan sizes upwards of Rs 1 lakh. The Rs 30,000 crore could instead be used for making inputs cheaper, launching farm cooperatives and giving incentives to effective food processing and marketing schemes.

Besides that, a promise of farm loan waiver in Gujarat does not stem from an unequivocal demand from the farmers as there has been significant mobilisation on farm loan waiver in other states as absent in Gujarat. In this scenario, the Congress promise to waive off farm loans seems ill-conceived. If this desperate bid to win the support of farmers forces BJP’s hand to follow suit, it would be putting the future of farmers of the state in jeopardy rather than securing their future.

The writer is a public policy consultant.


Updated Date: Nov 25, 2017 16:27 PM

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