1. FARM LOAN
WAIVER
LEC 600 SEMINAR
BY
J.ROBINSON RAJA
M-6006
DIVISION OF VETY & AH EXTENSION.
IVRI,BAREILLY.
2. OBJECTIVES
• What is farm loan waiver?
• Is it the best possible way to address agrarian crisis
• Would the waiver help to reduce farmer suicides
• Present situation of agriculture in India
• Are these problems addressed by the waiver
• Alternative use of government resources to improve agriculture
3. INTRODUCTION
• Economics- science of scarcity (Robbins.L,1935)
• Industry- prime moving force of economy- post independence.
• Agri-55.4% of GDP in 1950-51.
• 2002- Agriculture as prime mover of economy.
• Share of primary sector is less than 18 % of GDP
• 48.7 % dependency (E.Survey,2015-16)
• Monetary terms- no more agrarian economy
4. AGRICULTURE
• No burden of individual IT.
• Biggest unorganised sector- > 90% share in total unorganised sector
• 93.4% of total labour force (Min of Labour & Employment,2017)
1% increase in agriculture leads to
• 0.5 % increase in industrial output(growth)
• 0.7% increase in N. Income of India. C. Rangarajan(1982)
5. LOAN WAIVER
• Waiving of the real liability of person who has taken out it through voluntary
action.
HISTORY:
• Stafford loan forgiveness program – US
• Agricultural Debt waiver and Debt Relief scheme - India
6. STAFFORD LOAN FORGIVENESS
• Waive all or part of education loan .
CRITERIA:
• Volunteer work in AmeriCorps, the Peace corps, or Volunteers in Service to America
• Military service – Army National Guard
• Teaching full time in schools whose students come from low income families.
• Practicing law in public interest.
• Practicing medicine in remote or economically deprived communties
7. FARM LOAN WAIVERS IN INDIA
• VP Singh government-1990 – Rs 10000 Crores debt relief program of Rs 10000 per borrower
• 2008-FM- Relief package for small and marginal farmers
• 600 billion rupee package included the total value of loans to be waived for 30 million small and
marginal farmers( 500 billion rupees)
• One time settlement for another 10 million farmers.
• But debt waiver amount rose by 20% to 716.8 billion rupees and overall benefit extended to 43
million farmers
• 1-3% of GDP
8. LOAN WAIVERS
• 2014- Telangana waived Rs 17000 crore loans to 3.6 million farmers
• 2017- UP, MH, PJ, KA- waivers of about US$13.6 billion
• Cost 2-2.6% of GDP.
• 2018- RJ, AS, CH, MP
9. AGRARIAN CRISIS
• Sharp decline in share in GDP but not in dependency.
• Disguised unemployment.
• Increase in marginalisation of operational land holdings.
• Monsoon dependence.
• Traditional methods of irrigation
• Severe stress of water availability.
11. AGRI CENSUS 2010-11
Sl.No Size-Group
Percentage of
number of
operational
holdings to total
Percentage of
area operated
to total
1 Marginal (below 1.00
ha.)
67.10 22.50
2 Small (1.00 - 2.00 ha.) 17.91 22.08
3 Semi-medium (2.00 -
4.00 ha.)
10.04 23.63
4 Medium (4.00 - 10.00
ha.)
4.25 21.20
5 Large (10.00 ha. &
above)
0.70 10.59
Agri census-2015
• Small & marginal- 44% of total
cultivation
• 91% -landholding by small & marginal
farmers in 2030- Radha Mohan Singh
13. AGRARIAN CRISIS
• Falling price of agricultural commodities
• Absence of warehousing & agro-processing unit
• Recurring drought
• Inadequate crop insurance.
• Deterioration of RCCS.
• Informal credit at high rates of interest.
18. • Agriculture is in distress
• Farmer suicides
• Two successive droughts in FY15 & FY16 followed by good monsoon
in the next two years.
• Why not for agriculture?
FAVOUR OF FARM LOAN WAIVER
19. ADVERSE IMPACTS
Bad economics:
• Small base of taxpayers who bear the burden.
• Farming is exempt from IT
Bad banking:
• Moneylender stronger.
• Wrong Social Value.
21. CRITICS:
• Temporarily necessary, don’t provide secure long-term credit system
• Banks are compensated by government (M.S. Swaminathan)
• Waivers undermine an honest credit culture..
• Crowding out of private borrowers as high government borrowing tend to an
increasing cost of borrowing for others.
• Affect national balance sheet. (Urjit Patel)
23. TEMPORARY RESPITE
• Blanket farm loan waiver is lack of a structural solution
• Not long term solution (NITI Aayog)
• Credit Imbalance is inevitable
24. INCLUSION-EXCLUSION ERRORS
CAG Report on 2008 Agricultural Debt Waiver
• 8.5% of beneficiaries audited -not eligible for debt waiver (20.5crore)
• 13.5%- Eligible people but not consider by lending banks.
• Only 52000 crore is waived.
• 34%- certificates not issued properly .
• Denied benefits but names appeared in the list.
• Compensating farmers -not in dire need of a blanket waiver
• Exclusion of farmers under informal credit system
• Only 10% of farmers gain (NBPGR)
25. EXTENT OF EXCLUSION
NSSO SURVEY 59TH ROUND:
• 51.4%- farmers don’t access credit
• 27%-indebted to formal sources.(1/3rd borrow from non-formal
sources also).
• 73%-no access to formal sources of credit.
• 64%-financially excluded in central, eastern, north-eastern
26. • Reduced distress
• No capital formation / Investment
• No formal credit to farmers.
WB REPORT 2012
27. EQUITY IMBALANCE
• Socialist governments always run out of other peoples money
• Reroute funds from other infrastructural and development funds
• Imbalance in each sector’s predicted and desired growth
• Detrimental to state’s overall growth.
28. SUGGESTIONS FOR IMPROVEMENTS
• Unfeasible to revoke the policy initiative
• May be the most acceptable solution to address the immediate agrarian crisis
Identifying the beneficiaries:
• Definition on basis of size of landholdings doesn’t make much sense.
• Move away from a blanket loan approach
• Address worst-hit agrarian areas on priority basis
• Incorporate farmer loan repayment history.
• Implementation of PM relief package.
29. RESTRUCTURING OF LOANS
• For remaining famers across all districts, waiver of interest rates along
with extension of the timeline of loans
• Loans rescheduled.
• Eligible for fresh loans.
31. FORMALISATION OF INFORMAL CREDIT
• Moneylenders debt redemption fund
• Inclusion of financially excluded.
• Credit counselling for farmers
• Simplifying the procedure for mortgages.
• Simplifying procedures to reduce transaction cost
• Integration of MFIs with Mainstream banking.
32. CONTINUED
• NABARD-effective guidance & training to banks in the formulation of
project related to agriculture and non-farm sector.
• Priority sector lending to agriculture (18%).
33. RISK MITIGATION MEASURES
Two-tier approach.
• Crop/weather insurance at taluka/district level
• Distress relief at state level.
• MSP
• Price Risk Mitigation Fund
34. POLICY CHANGE
• Scanty rainfall, bad harvests, overproduction lead to losses
• Govt should decide what crop should be planted in which area
• MSP
• Pulses, oilseeds and vegetables
• Agrarian country- no policy
• Ban promoting farm loan waiver as part of election manifesto
(R.Rajan)
35. MEASURES
• Institutional arrangements for credit, extension & marketing.
• Large investment in Rural infrastructure & in agricultural research &
technology.
• KCC
38. KALIA-ODISHA
• Krushak Assistance for Livelihood and Income Augmentation
FINANCIAL ASSISTANCE
RS 10000 for taking cultivation Rs 12500 – goat rearing, mushroom etc
COVERAGE
Interest free crop loan up to Rs 50000 92% of cultivators & AL
KALIA
RS 10810 Crore 3 years till 2020-21
39. • Rs 4000 per acre was given to land owning farmers
• No land limit.
• Spent Rs 12000 crore during both seasons
RYTHU BANDHU SCHEME
40. DIET PLAN
• India – fastest growing economy
• 103/119 Countries in GHI- Serious
NFHS-2016:
• India vs Global
STUNTED UNDERWEIGHT
35.7 Vs 13.5 % 38.4 Vs 22.9%
42. AGRICULTURE VS HUNGER
• Malnutrition is high in agri surplus states.
• It is higher than average of odisha.
• MP – double digit growth in food grain production but suffering from high
proportion of underweight and stunted children
• Development in Gujarat is mostly growth, development, investement
• Not able to translate as better nutritional status.
• Chattisgarh, Odisha fared well compared to Gujarat, Maharastra.
43. DIVERSIFIED FOOD
• Food Intake Index-Using 19 food items in 640 districts.
• Only 12% children –stunted & underweight- food diversity.
• 50% stunted if they consume less than 3 food items.
• TN-Highly diversified food-low stunted / underweight.
44. SUMMARY
• Farm loan waiver
• Curing the symptom not the disease
• Bad economics, bad banking, bad moral value.
• KALIA
• Doubling the farmers income
• Diversification of food
• Price stabilisation
45. REFERENCES
• Report of the Expert Group on Agricultural Indebtedness by Ministry of
Finance GOI, July 2007-Radhakrishnan committee.
• All India Report on Agriculture Census 2010-2011.
• Suicides in farming sector-2015 by NCRB report on ADSI (Accidental Deaths
and Suicides in India.
• India in figures 2018 by GOI,MOSPI
• Report of the committee on financial inclusion by GOI, January 2008 by
C Rangarajan
46. REFERENCES
• Indian economy by Ramesh Singh-9th edition
• The Hindu newspaper
• The Economic Times
• The Moneycontrol.com
• WB report 2012