Reality Check India

The farm loan waiver loot

Posted in Uncategorized by realitycheck on March 2, 2008


The so called economic intellectuals are really cutting a sorry face on TV. They look at each other mid sentence as if asking, “How am I doing so far ?”.

Is everyone in India just comfortable ignoring the herd of elephants in the room ?

Apparently not everyone. This blog has  always held that M.J. Akbar is one of the very few true intellectuals in India. I dont mean being intelligent or scholarly, but simply who speaks his mind independently. Another is Chandan Mitra (see below)

In this own style, he hauls up the recent waiver of Rs 60,000 cr ( $15B) farmer loans (not necessarily farm loans).

The Congress formula for a victory in a general election is rather clever. The first ploy is to create the conditions for a plague and take credit for a miracle cure. The second line of private thought is even more cynical. If this ruse works, then the Congress can laugh all the way to the vote bank in October and tax us all next February till our pips squeak. And if the ruse does not work, it will be some other government’s headache. In the 19th century, American hustlers used to peddle “snake oil” at fairs to gullible fellow countrymen. This Sonia Gandhi-Manmohan Singh-Chidambaram loan waiver is the biggest snake-oil sale in the history of finance.

and further,

This one is a circus of magnificent proportions. It is not the audacity of hope, but the audacity of recklessness. Only when you are certain that you have nothing to lose do you gamble everything on an IOU. Duryodhana tried it in the Mahabharata. The results were not particularly happy.

Source : Arabnews

Chandan Mitra adds,

While Governments do have a responsibility towards the well-being of all, particularly less privileged, sections of society, it is wrong in principle to treat wilful defaulters the same way as those in genuine distress.
The second objection is even more serious. By this act, the Finance Minister has set a bar that all subsequent Governments will be compelled to observe. Hereafter, it will be impossible for banks to recover loans given to farmers because the recipients will have good reason to believe that eventually the loan will be waived and so why bother to pay even one installment?

Source : The Daily Pioneer

The real questions are :

1 What about the borrowers who paid back ?

2 What about the farmers who own more than the rather arbitrary 5 acres ? Do the rain gods selectively rain on their lands ? A drought is for everyone.

3 If, in an given area more than few are paying back – then what is the rationale for a waiver. This is just plainly encouraging delinquency.

4 What percentage of farmers in Telengana and Vidharbha have access to structured finance ? Statistics please, no tear jerkers.

5 This will never be a one time exercise. If it is, then every political party would want the same one time exercise. Why only the Congress ?

To wrap up, Mr Chidambaram’s press conference was a true classic. When pushed by a reporter how he planned to finance this. His curt and rather rude answer was, “You have to leave it to my intelligence”.

Ah, we get it. Life stories over data – every single time.

One Response

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  1. Sachin said, on March 24, 2008 at 5:37 am

    This money could have been use more prudently………but i guess politics comes first ………I just hope that it is just a one time exercise……… long term effect of this wavier are going to be very detrimental for the farmers and the country as a whole……

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