NEW DELHI: Criticising loan waiver announced by some political parties in their election manifestos, former RBI governor Raghuram Rajan on Friday maintained that farm loan waiver should not be part of poll promises. He said he had written to the Election Commission in this regard.
“I think our farmers deserve no less. We need to create an environment in which they can be a vibrant force and I would say more resources are definitely needed. Whether loan waivers are the best… I think it’s highly questionable,” Rajan said, while releasing a report titled An Economic Strategy for India.
“Certainly, there is reason to think about farm distress. But, the question is whether the flows to farmers are best affected by waiving loans. After all, there is only a subset of farmers who get those loans. So, it often goes to the best-connected rather than those most poorly off,” he said.Rajan’s remarks came after a fresh debate was sparked off on farm sector distress, which analysts say was the main reason for the ruling BJP losing in Rajasthan, Madhya Pradesh and Chhattisgarh assembly polls.
Agriculture loan waiver and increasing MSP of cereals were part of the manifestos of some political parties. This has put pressure on the Centre as well as other parties, forcing them to follow suit.According to Rajan, this is bad economics and creates “enormous problems for the fiscal of the state once those waivers are done”, “inhibits investment down the line” and “stress the budgets of the waiving state or Central government”.
It was for this reason he had written to the Election Commission, he said. “I have said forever, even written a letter to the Election Commissioner, saying they should be taken off the table,” he added. The report on the future economic vision of India was prepared by 13 economists from the country and abroad. Besides Rajan, economists Abhijit Banerjee, Gita Gopinath, Pranjul Bhandari, Amartya Lahiri, Prachi Mishra, Karthik Muralidharan, Rohini Pande and E Somanathan, among others contributed to the report.