With agriculture contributing over 27 per cent to Uttar Pradesh’s net state domestic product, the incoming Bharatiya Janata Party government’s promise to waive loans taken by small and marginal farmers, an assurance Prime Minister Narendra Modi repeated several times during his campaign, looks impressive on paper and could go a long way in reducing farm indebtedness. But experts feel a waiver of crop loans can have a negative impact on credit quality in farming.
Also, state governments can only waive crop loans taken from cooperative banks and primary agricultural cooperative societies (PACS), which extend a small part of total farm loans.