ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Politics of Farm Loan Waivers

A Comparative Study

Loan waiver policies are ostensibly political decisions, but surprisingly there have been no political analyses of the policy. The paper presents a political study on the policy through a descriptive analysis of a comprehensive primary data set that comprises all loan waiver announcements in India over the last three decades. The findings bring into light the political, economic and environmental factors that have had a bearing on the politicians’ choice to introduce waivers. Further, it highlights that politicians choose from a variety of waiver policy designs, and this choice has substantive implications for the size of the waiver programme.

The authors thank the participants at the XIIIth International Conference on Public Policy and Management hosted by IIM Bangalore for their comments. They would particularly like to thank Gopal Naik,
N Ravi, Suhas Palshikar, Trilochan Sastry, Aparna Krishna, Gursewak Singh and Ravish Tiwari for their comments on an earlier draft/presentation of the paper.

Loan waivers have emerged as the prominent policy choice for addressing the issue of agricultural distress. Over the last one year waivers of farm loans were announced by a number of state governments such as Uttar Pradesh (UP), Maharashtra, Rajasthan, Punjab and Karnataka and the policy is under serious consideration by the state governments of Madhya Pradesh and perhaps even by the central government. This expansion of the loan waiver policy has prompted many studies and commentaries by scholars that have presented a variety of perspectives on the issue.

The extant discourse on the policy may be divided into three broad categories. The first category constitutes commentaries that are supportive of the policy and argue for the need for waivers to relieve the persistent debt stress faced by farmers following years of rural stagnancy. Commentators holding this view argue that if waivers have been granted to industrialists, why should they not be extended to farmers that are in dire straits and are committing suicide (Sainath 2008)? Alongside this is also the rational argument of the debt overhang theory (Patel 2017: 6) that hypothesises that loan waivers would help distressed farmers overcome the debt baggage and enable them to make productive investments.

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Updated On : 10th Jun, 2019
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