[dropcap]C[/dropcap]ongress president Rahul Gandhi has vowed not to let PM Modi sleep until he tackles the woes of farmers after the three newly instituted Congress governments in Madhya Pradesh, Rajasthan and Chhattisgarh wrote off farm loans within hours of taking oath of office. Rahul had promised during the election campaign that the Congress, if voted to power, would announce loan waivers within 10 days, but the new Congress state governments fulfilled his promise within just a couple of days.
Rahul has also claimed credit for waking up the chief ministers of Gujarat and Assam, who followed suit and announced similar reliefs. Irrespective of whether it was an afterthought in view of the Congress move, or a knee-jerk reaction to the electoral drubbing, Rahul can legitimately claim credit for the sheer timing of the decision by the BJP governments. Rahul Gandhi has been trying to project himself as the ‘messiah of Indian farmers’ and attacking the Modi government for pretending not to see their plight, which has been causing nationwide unrest. The sub-text of the election results in the Hindi heartland states has attributed the BJP defeat to the disenchantment of farmers and low income-earners with the policies of the Modi government, which Rahul successfully managed to project as pro-rich and anti-poor.
The Congress president has pushed loan waiver as the new currency in Indian politics and the Modi government can ignore it only at its own peril. The latest one hears about the issue is that the Centre is now readying the roll-out of major sops that it hopes will help regain some of the lost ground ahead of the crucial 2019 General Elections.
While Rahul’s promise of loan waivers may have helped his party come to power in the three states, its soundness as economic policy is increasingly being called into question. Loan waivers neither help the farmers, nor improve agrarian economy. Most farmers in distress fall outside the universe of beneficiaries entitled for institutional finance and, as such the write-offs do not benefit the largest segment of poor farmers. Loan waivers actually become a drag on the economy and further curtail the availability of credit to the small and marginal farmers, who are in dire need of help. Appeasement schemes targeted at the more influential segments, in fact, raise the cost of borrowing for the poorer lot. It is estimated that farm loan waivers benefit no more than 10-15 per cent of the farmers.
Loan write-offs suffer from the law of diminishing returns and, perhaps, a more viable alternative would be to disburse cash assistance directly to the farmers, as has been successfully tried out by the KCR government in Telangana. And, more importantly, it has proved to be politically correct, as well, ensuring the ruling party a sweeping victory in the polls.