[dropcap]S[/dropcap]marting under one of the worst drubbings at the hands of voters in the Hindi heartland, BJP has been driven to desperation to win back support. Latest indications suggest that the Modi government is throwing all financial caution to the wind if that is what it takes to retrieve the situation.
According to reports, the government is considering to waive off farm loans worth Rs 4 lakh crore to address the agrarian distress, which has cost the ruling alliance dearly in the Assembly elections. It is estimated that such massive write-offs could cost the government more than 5 times a similar exercise by the Congress government announced in 2008 to win over aggrieved farmers. The UPA largesse had cost only Rs 72,000 crore, but had left gaping holes in government finances for years to come.
A loan waiver of the size contemplated by the Modi government is certain to further stress India’s already widening fiscal deficit. Still, in the absence of any softer options, the Modi government is seen unlikely to be dissuaded from the desperate action. Already, the government has been struggling to keep the fiscal deficit at 3.3 per cent of GDP, which is estimated to have breached the target in the last quarter of the year. A massive write-off like the one under consideration could upset all calculations and put the Centre’s finances under the severest strain witnessed yet.
That the massive dole-out is a knee-jerk response is obvious from the fact that only the other day, even as the results were being announced, the government had insisted that there was no proposal for any farm loan waiver under the consideration of the Centre. In a written reply Minister of State for Agriculture Parshottam Rupala had clarified in parliament that the government was not contemplating any such scheme.
It seems that the voters fell for the promise by Congress president Rahul Gandhi during the election campaign that, if voted to power, the Congress governments would write off all loans owed by the farmers. It did not take any effort for Rahul to make such a promise because he did not have to bother about where the resources would come from. But when the mantle falls on the Modi government, it has to pitch in with real money. Either way, the BJP bid would only be seen as a me-too effort as the credit has already been claimed and encashed by Rahul and his Congress, while the BJP is forced to foot the bill and suffer all the headaches. Even when the Modi government takes upon itself the daunting task, it would take a Herculean effort to deny credit to the state governments, the benefits of which will obviously go to the Congress-ruled states. It is, thus, a double whammy for the Modi government.