कृषि कर्जमाफी का अर्थव्यवस्था पर प्रभाव
Impact of Farm Loan Waiver on Economy
In the absence of coordinated and sustained efforts to put in place elements of a virtuous cycle of uplift of farmers’ income, loan waivers have periodically emerged as a quick fix to ease their distress. Recently, states including Uttar Pradesh and Maharashtra have announced farm loan waivers adding up to Rs 1.3 trillion or 0.8% of GDP this fiscal.
According to the Economic Survey 2016-17 (Volume 2), the burden of farm loan waivers could be as much as `2.2-2.7 lakh crore if all states start offering the relief and would stoke short-term deflationary shock in the economy. The survey estimates that loan waivers by all states could reduce aggregate demand by as much as 0.7% of GDP. This is because the states funding the loan waiver would have to prune spending and possibly raise taxes to improve revenue and stick to their fiscal deficit limits, although private demands tends to get a boost from the loan waivers. Even as the central government makes significant efforts toward fiscal consolidation, the higher debt burden of the states could push up general government debt.
Increased discrimination: Loan waivers also lead to faulty targeting of beneficiaries and resultant discrimination, incentivise wilful defaulters and erode credit discipline.
Deteriorating assets quality: Since waiver announcements and actual dole-out come with a time lag, in this interregnum, the quality of assets deteriorates and bridge provisions crowd out new loans. It impacts public finances via higher than budgeted revenue spends. This will have to be financed by additional market borrowings which push up interest rates, not just for the states but for the entire economy.
Collateral damage: A collateral damage is that private borrowers are crowded out as the cost of borrowing rises. Even if loan waiver is accommodated within the budget, it will force cut-backs in other heads of expenditure.
Therefore, these loan waivers could impact credit discipline, vitiate credit culture and disincentivise borrowers from repayment. Ultimately loan waivers involve a transfer of resources from tax payers to borrowers which can also crimp consumption redistribution.
