Farm loan waiver may hike prices

With farmers from several states demanding farm loan waiver, the Reserve Bank of India on Wednesday cautioned state governments of fiscal situation getting out of their hand if they accept such demands.

In its second bi-monthly monetary policy review for 2017-18, the RBI said that it would be risky to tread on that path (waiving farm loans), unless state governments budgets allow that fiscal space.

“The risk of fiscal slippages, which by and large can entail inflationary spillovers, has risen with the announcements of large farm loan waivers,” it said.

The demand for farm loan waiver has picked up after the Uttar Pradesh government had conceded it by waiving farm loans worth `36,000 crore in April. In 2014, Telangana and Andhra Pradesh had waived farm loans, while farmers from Tamil Nadu had organised protests in Delhi seeking loan waiver.

Maharashtra and Madhya Pradesh — both states ruled by the BJP — are witnessing agitation for farm loan waivers.

On Tuesday, Maharashtra Chief Minister Devendra Fadnavis had said the government will announce a loan waiver before October 31 and about 1.07 crore farmers with less than five acres of land would be eligible for it. It would cost `30,000 crore for the Maharashtra government.

RBI governor Urjit Patel, however, said that the risk of going down the “slippery path” of waiver could dissipate the important gains that the states made in fiscal rectitude over the last two and a half years.

“Past episodes in our country had shown that when there are significant fiscal slippages they do permeate to inflation sooner or later. So, it is a path that we need to tread very carefully and before it gets out of hand,” he said.

Maharashtra-based Swabhimani Shetkari Sanghatana (SSS) Raju Shetty said that an allIndia meeting has been called in Delhi on June 16 to discuss future strategy.