Farm loan waivers will stress the funds of states, and damage both farmers and banking institutions on the long haul
The monetary policy committee (MPC) of the Reserve Bank of India (RBI) pointed out that the implementation of farm loan waivers across states could hurt the finances of states and make them throw good money after bad, and stoke inflation in its policy statement released last week.
Just how much of an effect will the waivers have actually in the Indian economy?
A Mint analysis suggests that the cumulative effect of farm loan waivers is going to be less than compared to the power-restructuring package, Ujwal Discom Assurance Yojana (UDAY), unless they’ve been extended to all the Indian states. Nonetheless, your debt waiver packages, even though restricted to a couple of states, will probably turn out to be counter-productive and supply small gains to farmers throughout the run that is long.
To date, three major states—Uttar Pradesh (UP), Punjab and Maharashtra—have announced large-scale farm financial obligation waivers. Continue Reading