{"id":4952,"date":"2017-03-22T10:49:53","date_gmt":"2017-03-22T05:19:53","guid":{"rendered":"https:\/\/teekhapan.wordpress.com\/?p=4952"},"modified":"2017-03-22T10:49:53","modified_gmt":"2017-03-22T05:19:53","slug":"why-waiving-off-up-farm-loans-is-a-bad-idea-nevertheless","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2017\/03\/22\/why-waiving-off-up-farm-loans-is-a-bad-idea-nevertheless\/","title":{"rendered":"Why Waiving Off UP Farm Loans is a Bad Idea, Nevertheless…"},"content":{"rendered":"
<\/a><\/p>\n In the run-up to the assembly elections in Uttar Pradesh<\/a>, the Bhartiya Janata Party had promised that it would waive off crop loans taken by the small and marginal farmers of the state.<\/p>\n Political parties promising to waive off crop loans is nothing new. Before the 2009, Lok Sabha elections, the Congress led United Progressive Alliance government had carried out a similar exercise.<\/p>\n The question, as always, is how much is it going to cost and where is the money going to come from? The State Bank of India in a research report expects the cost of waiving off crop loans to small and marginal farmers to come at around Rs 27,419.7 crore. How have they arrived at this estimate? The total loans given by banks to the agriculture sector in Uttar Pradesh stands at Rs 86,241 crore.<\/p>\n As the SBI report points out: “According to RBI data (2012), 31% of the direct agriculture finance went to marginal and small farmers (landholdings upto 2.5 acres). Taking this as a proxy for Uttar Pradesh as well, approximately Rs 27,419.70 crore will have to be waived off in case loan waiver scheme is implemented for the small and marginal farmers for all banks (scheduled commercial banks, cooperative banks and primary agricultural cooperative societies).”<\/em><\/p>\n The SBI estimate suggests that the loan waive off will cost around Rs 27,420 crore. The banks which had given these loans will have to be compensated for this waive off. The union agriculture minister Radha Mohan Singh in a series of tweets on March 17,2017, made it clear that the union government wasn’t picking up the tab. In one of the tweets he said that, if any state government waives off the loans of small and marginal farmers using the state treasury, the move should be welcomed. Hence, from the looks of it, if the loans are waived off, the Uttar Pradesh government will have to pick up the tab.<\/p>\n Take a look at Figure 1. It shows the fiscal deficit of the Uttar Pradesh government over the years. A government is said to run a fiscal deficit if its revenue is less than its expenditure. This difference the government makes up through borrowing money.<\/p>\n As can be seen from Figure 1, the fiscal deficit of the state has risen at a much faster pace than its gross domestic product over the years. While, the state GDP has jumped by 59.3 per cent between 2011-2012 and 2015-2016, the fiscal deficit has jumped from 2.13 per cent of the state GDP to 5.57 per cent of the state GDP, at a much faster pace.<\/p>\n Figure 1:<\/p>\n