Why farm loan waivers are not a good idea

Loan waivers barely address the problems of small and marginal farmers. They only help the larger farmers, and their correlation with reduction in agrarian distress appears insignificant

Waiving farm loans is like plucking low-hanging fruit in India’s political economy. And it skirts the issue of major reforms required in the agri-economic system. Without structural changes, the distress resurfaces and the crisis recurs.

At the very least, blanket loan waivers are questionable on equity grounds. They benefit the larger borrowers more than small and marginal ones. Union government data on the indebtedness of agricultural households according to land size (extracted from bank statistics) shows that the average outstanding loan of the smallest farmers owning less than one hectare is one-tenth that of farmers owning 10 hectares or more.