Farm Loan Waivers: A Study of Fiscal Impacts in Selected States in India
The significance of the agricultural sector in India cannot be undermined. While its share is estimated at 14.4% in Gross Value Added in 2018-19 (Economic Survey, 2019), it continues to be the primary means of livelihood for a substantial 58% of our population (IBEF, 2019). Apart from building food security, the rural segment of our population also tends to support the overall economy, through its consumption spending. Understandably, several policies have been directed towards this sector from both the center and the states, time and again. While farmers endured consecutive droughts in 2014 and 2015, the specter of collapsing food prices, indebtedness, low productivity, lack of irrigation facilities have had a disastrous impact on them. Given that over half of farmer households are in debt (NSSO 70th Round),one of the policies increasingly being used by state governments to tackle farm distress is that of loan waivers. Over the last two years itself states like Uttar Pradesh, Rajasthan, Maharashtra, Punjab, Tamil Nadu and Karnataka have announced farm loan waivers. These loan waivers have the potential to significantly affect the state exchequer and they could carry a significant opportunity cost too. The objective of this research is to offer a comprehensive view of loan waiver schemes across states in India as well as look at the fiscal implications of these loan waivers in ten states that have implemented loan waivers after 2014. Fiscal implications will be measured by assessing the impact of loan waivers on fiscal deficit, outstanding loans, capital and revenue expenditures of states. Comparison of the fiscal implications of loan waivers in various states will provide insights for designing fiscally responsible expenditure polices to mitigate agrarian distress in various states across the country.