Monday, March 10, 2008

Agri-loan waiver, pain or promise??

The Rs.60,000 crore agri-loan waiver, peanuts or a bane for the economy ??

Every year industries are handed over tax concessions, corporate tax rate cuts and to top it loan defaults are waived off. The Central and state government employees are given out doles amounting to thousands of crores in the form of DA increases for continuing their shabby, inefficient and in some case corruption in government service. From 2000-04, Central govt wrote off about 44,000 crores, with this list topping to record levels when NDA govt was to move out. This is not discussed anywhere, no budget speeches talk of this massive drain on the exchequer, nobody sheds crocodile tears for this massive write-off. No budget speech mentions of this dran, because this is a dole to another person from the same high economic bracket as the speaker making the budget speech and so on. The beneficiaries are mostly very well-to-do industrialists who have siphoned off the money for some unaccounted businesses or to their swiss bank accounts.

The forward community of Indians, while discussing the govt write-off of Rs. 60,000 crores have been discussing whether this was really deserved by the farmers, who will support them again next year, whether it was attacking the symptoms of the agri loan defaults than the causes..

Let us analyse these in detail.

Writing off bank loans is the part of action initiated by the government to reassure the farmers that if nature is unfavourable to them, the Central govt is concerned and will do it's best to save them from debts. It is a sort of unwritten guarantee given to the farmers. In other words this works out as a subsidy which ensures that the farmers  continue working on the farms, or in other words continuing to support the backbone of the country. Even though it is a fact that agriculture contributes just 18 % of the GDP of the country, consider the percentage of population which depends on it for livelihood, almost 70 percent.

The other comforting factor is that the rs 60,000 crore writeoff which the govt has announced now is going to the banks who otherwise would have spent more than double that amount trying to recover these loans from the farmers. It is only in the case of advances to Industry that write-offs are more common as there is high greasing of palms possible.

Consider the masive subsidies the developed nations are pouring into their agribusineses and how thay are supporting their farmers. Considering that this waiver is just peanuts !!

Kind regards,

George Easaw 


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