The document discusses farm loan waivers in India. It provides background on agricultural issues like declining GDP share but high dependency, marginalization of land holdings, and monsoon dependence. It then summarizes the history of farm loan waivers in India since 1990, their large costs, and inclusion/exclusion errors. Critics argue waivers undermine credit culture and have adverse economic impacts. Alternatives proposed include risk mitigation measures, formalizing informal credit, and increasing investment in rural infrastructure and agriculture.

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.

10. AGRICULTURAL DEVELOPMENT

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

12. AIR ON AGRICULTURAL CENSUS 2011

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.

14. ADSI REPORT ON FARMERS SUICIDES

15. STATEWISE SUICIDES
Source: ADSI report by NCRB

16. CAUSES OF FARMER SUICIDES
Source: ADSI report by NCRB

17. FARMER SUICIDES
• Farmer suicide down by 10% in 2016
• No official reports later.

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.

20. DRAWBACKS OF FARM LOAN WAIVER
ELECTION
LOAN WAIVER
EXPECTATION
NPA
INCREASES
BANKS
REFUSE
LOAN
LOAN FROM
MONEYLENDERS
@HIGH INTEREST
SUICIDES

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)

22. SPECIFIC CRITICISMS
ASSUMPTIONS:
• 1st –indebtedness
• 2nd –small & marginal farmers
FLAWS IN SCHEME:
• Temporary Respite
• Inclusion-Exclusion Errors
• Equity imbalance

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.

30. AGRICULTURAL CREDIT
SOURCE: Report on Medium Term Financial
Inclusion by RBI

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

36. INTEREST SUBVENTION SCHEME(ISS)
ISS
SHORT TERM CROP
LOAN UPTO 3
LAKHS
PAID IN TIME
5% ISS
NOT PAID IN TIME
2% ISS

37. GOVERNMENT INITIATIVES
• MSP
• PMFBY
• e-NAM
• Efficient Agriculture Export policy
• Krishnonati

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%

41. DIET PLAN
MALNUTRITION
AFFECTS
CHILDHOOD
HEALTH
DISEASE
BURDEN
AFFECTS
EDUCATION
WAGES
REDUCED
PRODUCTION
WHEN GROW
UP
IMPACTION OF
GROWTH
EFFICIENCY
EFFECTIVENES
REDUCED
NO DOUBLING
OF FARMERS
INCOME

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

47. THANK YOU