RS 3.12 TRILLION WRITTEN OFF AS FARM LOANS SINCE 2008

ued to remain unpaid as on 29 February 2008, with no upper limit on the eligible amount for waiver. The Congress benefited from this massive loan waiver scheme and despite a strong anti-incumbency and the massive security lapses that were seen during the Mumbai attack, it was able to return to power in the May 2009 general elections.

The success of this “scheme”, as is evident, from the data presented by the RBI in its report, pushed other state governments to employ the same in their own state.

According to the RBI report, the scale of farm loan waivers started witnessing unprecedented increase from 2014. And since then, until September 2019, 10 states wrote off farm loans aggregating Rs 2.4 trillion or Rs 2,40,000 crore (1.4% of 2016-17 GDP at current prices).

The RBI in its report has stated that this practice of waiving off farm loans, though marketed as something that helps the farmer, in reality, impacts the farmers’ interest in the medium and long term and is mostly based on political consideration. “Notwithstanding the evidence of deficit rainfall conditions and downswing in agriculture produce prices in announcements of loan waivers, the timing of loan waiver announcements during election cycles, points to more of political expediency of such waiver programmes that do not really address long-term issues in agriculture. The nationwide loan waiver programmes of 1990 and 2008 were announced by the Union government in the run-up to the parliamentary elections of 1991 and 2009, respectively. Similarly, eight out of 10 loan waiver announcements since 2014 were made within 90 days of their respective states’ election results,” stated the RBI report, which was authored by a seven-member team.

The report further stated that due to the practice of loan waivers, “borrowers choose to default strategically in anticipation of future bailouts, and banks start reallocating lending to lower risk borrower segments”.

The following are the details of farm loans waived off by the 10 states mentioned in the report since 2014: Andhra Pradesh (Rs 240 billion; 201415); Telangana (Rs 170 billion; 2014-15); Tamil Nadu (Rs 52.8 billion; 2016-17); Maharashtra (Rs 340.2 billion; 201718); Uttar Pradesh (Rs 363.6 billion; 2017-18); Punjab (Rs 100 billion; 2017-18); Karnataka (Rs 180 billion; 2017-18); Karnataka (Rs 440 billion; 2018-19); Rajasthan (Rs 180 billion; 2018-19); Madhya Pradesh (Rs 365 billion; 2018-19); Chhattisgarh (Rs 61 billion; 2018-19).