Loan waiver for farmers – Boon or Bane?
View
There has been widespread debate on the news, after the election of the new chief minister of Karnataka on waiving off farmers’ loans. These debates were sparked after the newly elected chief minister Kumaraswamy promised in his campaign that he would waive off farmers’ loans.
In my opinion, that loans should be waived off as farming requires heavy investment and it may not be affordable for many farmers to buy equipment, seeds and other requirements.Also there has been many suicides of farmers because they're not able to pay off their loans. Farmers in India depend on the monsoon rains to grow their crops, due to untimely rainfall and irrigation the yield is less which leaves very little money with the farmers to pay off their debts.Also not many banks are we to provide loans to farmers as it is of high risk and the paying capacity of the farmers are less. Due to lack of finances they go to unofficial moneylenders who charge exorbitant rates of interest and take their lands as collateral. Waiving off loans will lead farmers to the banks rather than such moneylenders. Also due to lack of incentives to take up farming, many farmers are leaving farming, which would eventually lead to food scarcity in India. Waiving off such loans will enable many more farmers to take up farming. It is also beneficial for political parties as they can gain electoral favours in India as a high percentage of the population depend on farming. Waiving off loans reduces the short term liabilities of the farmers.
By
Joshua D'costa
Counter View
Loan waivers have become the centre of debate in policy making circles. A number of states in India have waived off farmer's loans and this has indeed unburdened the farmers but has become a burden to the banks, government and the economy as a whole. I believe that these loan waiver schemes disrupt credit discipline. The farmers become defaulters and this disrupts financial activity and affects the economy.This scheme indirectly punishes loan repayers. Those who repaid loan before the announcement of the scheme are at loss.Waiver of any principal is damaging for the banks, Government and the depositors in banks. Farmers may get some temporary relief. But some farmers become habitual defaulters. They take loans in the name of farming activities. They divert the loan amount for other purposes. Then default on payment of loan and interests.Many state Governments promise relief on payment of land revenue. Some promise on waiver of interests and ultimately all go for waiver of loans. Such kind of free relief may damage the cooperative banks and rural banks on financial term. Most of the state Governments are bankrupt due to schemes on subsidies and financial reliefs.
Rich farmers too may take loans even if there is no need, in the hope of the next loan waiver scheme. This will impact the farmers who are genuinely in need of loans.Those who didn’t repay loans, even if they afford to are at benefit. But here, taxpayers are at loss, because loans will be waived with taxpayers’ money.
Instead of loan waiver scheme, it will much better if government improves the crop insurance scheme, educates farmers about the market which will increase their knowledge.
By
Celine Maria L
View
There has been widespread debate on the news, after the election of the new chief minister of Karnataka on waiving off farmers’ loans. These debates were sparked after the newly elected chief minister Kumaraswamy promised in his campaign that he would waive off farmers’ loans.
In my opinion, that loans should be waived off as farming requires heavy investment and it may not be affordable for many farmers to buy equipment, seeds and other requirements.Also there has been many suicides of farmers because they're not able to pay off their loans. Farmers in India depend on the monsoon rains to grow their crops, due to untimely rainfall and irrigation the yield is less which leaves very little money with the farmers to pay off their debts.Also not many banks are we to provide loans to farmers as it is of high risk and the paying capacity of the farmers are less. Due to lack of finances they go to unofficial moneylenders who charge exorbitant rates of interest and take their lands as collateral. Waiving off loans will lead farmers to the banks rather than such moneylenders. Also due to lack of incentives to take up farming, many farmers are leaving farming, which would eventually lead to food scarcity in India. Waiving off such loans will enable many more farmers to take up farming. It is also beneficial for political parties as they can gain electoral favours in India as a high percentage of the population depend on farming. Waiving off loans reduces the short term liabilities of the farmers.
By
Joshua D'costa
Counter View
Loan waivers have become the centre of debate in policy making circles. A number of states in India have waived off farmer's loans and this has indeed unburdened the farmers but has become a burden to the banks, government and the economy as a whole. I believe that these loan waiver schemes disrupt credit discipline. The farmers become defaulters and this disrupts financial activity and affects the economy.This scheme indirectly punishes loan repayers. Those who repaid loan before the announcement of the scheme are at loss.Waiver of any principal is damaging for the banks, Government and the depositors in banks. Farmers may get some temporary relief. But some farmers become habitual defaulters. They take loans in the name of farming activities. They divert the loan amount for other purposes. Then default on payment of loan and interests.Many state Governments promise relief on payment of land revenue. Some promise on waiver of interests and ultimately all go for waiver of loans. Such kind of free relief may damage the cooperative banks and rural banks on financial term. Most of the state Governments are bankrupt due to schemes on subsidies and financial reliefs.
Rich farmers too may take loans even if there is no need, in the hope of the next loan waiver scheme. This will impact the farmers who are genuinely in need of loans.Those who didn’t repay loans, even if they afford to are at benefit. But here, taxpayers are at loss, because loans will be waived with taxpayers’ money.
Instead of loan waiver scheme, it will much better if government improves the crop insurance scheme, educates farmers about the market which will increase their knowledge.
By
Celine Maria L
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