Prima facie the 50,000 cr loan waiver for small/marginal farmers appears to be a populist measure. Free market proponents will argue that it is a 'moral hazard' (a popular phrase these days) and would encourage farmers who have been regular in paying back their debt to default on their loans.

But let's keep the free market arguments aside for a moment and try to analyze the impact of the waiver. According to the scheme, farmers with upto 2 hectares of land will get complete waiver, while others will get a 25% rebate on their loan amount.

According to ET, the total exposure of commercial banks, mostly PSUs, is 12,000 cr and the remainder is in the books of co-operative and regional rural banks. Probably, all of these loans are marked as NPAs and the banks must have already provisioned for them in their books. Infact, with the govt's reimbursements, it will probably provide a one time boost to the incomes of the banks. So far so good. The farmer is relieved, the bank has recovered its NPA and the govt picks up the tab or should I say the honest hardworking tax payer picks up the tab but such things happen in a democracy. After all the FM has already given an income tax break of 50,000 cr to the middle class. Net-Net we are even.

But does this waiver actually benefit the distressed farmer with suicidal tendencies ? If one were to go back and look at the past news items and studies done by NGOs and eminent journalists, it appears that the badly affected and suffering farmers had borrowed from private moneylenders at astronomical rates. How is this waiver going to help them ?
Surprisingly, there is no mention of any kind of plan or strategy to ensure that farmers don't fall back into this debt trap again.

The other interesting thing to note is that most of these loans are doled out by cooperative and rural banks. We all know the kind of racket these guys do. My hunch is that the farmers that would actually benefit from this waiver are those who have taken loans from these scamster banks and have willingly defaulted, knowing fully well that the friendly politicians (Sharad Pawar and the likes) would lobby on their behalf and ensure that they are bailed out.
These farmers anyway pay no tax on their agricultural income. Now, they don't need to pay, neither the interest nor the principal on their debt.
Life couldn't get better for these folks. No taxes and borrow as much as you like.

I hope some journalist investigates it and brings out the real truth behind it.

Originally posted by patnitin I think he is one of the educated ,sophisticated ARROGANT, Hon. Minister.   He never answers difficult questions and thinks that only he knows every thing and always demeans others.I have rarely seen any of his interviews where he respects others views.   Only bad thing is that I am on his side on this decision.     Nitin P

Originally posted by patnitin That probably means that he doesn't have any answers now! and probably this decision was made under haste at last minute. (orders from Maam!) and he didnot have time to prepare for the examinations(questioning). Though we criticise Sharad Pawar ,I think he would have articulated the governments point of view in a far far better way. In any case Hon. FM doesn't inspire me,I am a diehard Vajpayee fan and a neutral person after his retirement.

Originally posted by patnitin All that could be done if the Farmer Lives the NEXT day!   If farmers suicides are increasing day by day ,some urgent measure was really needed.   Market cap etc.. is fine,but in a society where people in large numbers commit suicide cannot be called a civilised one and a great nation.   As regards to the comments on the preparation of our FM,I was actually commenting in a negative way on our FM.   Nitin P.