Saturday, March 1, 2008

Loan Waiver -A bad precedent?

The Budget- 2008 has been termed as a "Farmers Budget" by many. Even before the entire budget speech was concluded, crowds thronged before , 10 Janpath street celebrating and revelling at Chidambaram's promised Rs 60,000 Crore of agricultural loan waiver to farmers by 30th June 2008.
Meanhile Sonia Gandhi flashes a victorious smile before the camera and declares "...this has been a revolutionary budget ...for the farmers in particular.." Quite a revolutionary budget one must say. Given the fact that it is still not clear what kind of financial instruments the Government will resort to ease the writing off of Rs 60,000 Crores in loan, it is indeed a 'wait and watch' situation.
Now, with Chidambaram's inimitable style of setting himself a deadline for a task such as this, one can only expect to see one of the two possible outcomes
  1. The UPA Government fails in meeting the deadline or calls for election before that date and passes on the new found burden to the next Government.
  2. The Government actually manages to find finances to fund the whopping waive off.

If the outcome happens to be number 1, then its a furthur 'wait and watch' situation. But my concern in this blog is what if the outcome happens to be number 2.!!

Whether policies like Loan Waive off or Reservations are populistic political measures employed by Governements in power , I am not sure. But I cant help wondering what repurcussions do such measures have in an economic sense!

If the Government actually manages to waive off the loans, wont it be sending a message to every farmer in the country that " If you take a loan and repay it, You are a fool!"? Wont these measures act as incentives to loan defaulters to continue to default, because sooner or later , any Government in power will have to follow Chidambaram's precedent and waive it off.

Won't these measures act as deterrents for banks from actually handing loans over to farmers for agricultural developments? Won't these throw our agricultural economy to dwindle furthur from want of funds? In the name of a " Farmer's Budget" are we compromising on the farmer's competance to produce efficiently and make a profit enough to repay a loan? Are we throwing the agricultural sector into the dark ages?

Why can't we on the contrast penalise farmers for defaulting? Why cant we force the agricultural sector into becoming more efficient? This probably leads to the most disheartening and dangerous truth of a democracy like that of ours. That populist Governments no matter how well they mean, cant overlook the pressures of the majority vote!


Hari said...

Hope politician will understand this language

vijayan said...

Incentive for not repaying promptly
Government cannot absolve itself of the responsibility of proper identification of the eligible farmers for loan waiver. It cannot simply go on adding unremunerative work to the Bankers to do the job of identification. As is the experience in the past many ineligible farmers also get the benefit.

Panduranga said...

Yes its a farmer budget !!! How is this farmer ? he is one in million ? no he is 7 in every 10 people ! Yes then it has to be mint for him only. Ok why this new budget only concerned about the farmer ? why not earlier one s ? All are farmers budget only but this has a difference of 60,000 Crore loan waiver !!! . "If some one is hungry give him food " - this is a solution ? No it will never help him he, will come again and ask you right ? He himself becoming slave ??? no we are making him as slave !!! . Why dont we help them to earn thier own food , they are capable its proven in 17th century itself ( 30 % of world GDP) !!!! . Introduce new technology in agriculture ... fertilizers, rain independent croping , infrastruture .. good price for the crops .. it will help them to earn thier food - simple solution . But its a long process no political party has started , few five year projects helped for India. But it wont assure the Power to rule for any party !!!!.

OK ... from where we will get that money ? Yes our FM is very smart and intelligent... but we cant depend on one individual to run a 100 crore people country . If we get the answers its well and good. Good for India too. Or else we have to assume like this are these money is printed and sent to banks if it is so then i have to take truck full of curreny note to have a cup of coffee !!! .
Still its good budget as per as the farmers are concerned, sorry 70% people are concerned.