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Resource centre on India's rural distress
 
 

'Farm loan waivers against economic principles'

-PTI

About Rs. 1.47 lakh crore of agricultural loans are outstanding in Madhya Pradesh, Rajasthan and Chhattisgarh

Asian Development Bank (ADB) Country Director Kenichi Yokoyama Friday said farm loan waivers were against economic principles and cannot effectively address the agrarian distress.

Yokoyama also advocated for direct transfer of funds to targeted beneficiaries as it would cut down leakages.

On farm loan waiver, he said most of the people are sceptical about it as an economic principle and has moral hazards.

“There is a need to address agriculture sector distress but economic principle wise, farm loan waiver is not an effective means to address farm distress,” he said.

Earlier this week, Reserve Bank of India (RBI) Governor Shaktikanta Das said any generalised farm loan waiver adversely impacts the credit culture and the behaviour of borrowers, amid various states announcing waivers. He said loan waiver is related to the fiscal space that a particular state government has.

About ?1.47 lakh crore of agricultural loans are outstanding in Madhya Pradesh, Rajasthan and Chhattisgarh, which announced waivers recently.

Appreciating the fact that India has a platform to provide Direct Benefit Transfer (DBT) through Aadhaar, Yokoyama said analysis has to be done on how government can launch Universal Basic Income (UBI) scheme in the most efficient way.

Asked if there was a stress on fiscal deficit, Yokoyama said ADB has no doubt about the government meeting the target.

“I think a clear framework is there and mandate given under the Fiscal Responsibility and Budget Management Act. We don’t have any doubt over it,” he said.

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