Myopic Loan Waiver of Budget 2008

Sent to THE HINDU on March 5 2008

"Give a man a fish, you feed him for a day, Teach a man to fish and you feed him for a lifetime".If Mr. P. Chidambram would have realized this then farmer relief would have been given more ingeniously with a long-term vision of providing adequate means of livelihood to the aggrieved farmers all over the country. The loan waiver would certainly provide some temporary relief to the farmers but it mainly fails on the following aspects.

1) No future security to the farmers.
2) No relief to farmers in the clutches of the private high-interest money lenders.
3) Liquidity burden on the banks.
4) Injustice to the farmers who have already paid their debts ( which may in future boost dishonest practices to claim loan waivers ).

And the gravest of all is the dividing of farmers into small and marginal farmers and other farmers based on the land-holding size.
Isnt it a serious error, whether the farmer holds one hectare of land or 20 hectare of land wont a drought affect both in the similar manner. Infact the farmers with large holdings of land are more likely to be at a greater loss and in a greater debt.

And for all these objections hollow and unconvincing explanations have been cited like

" We can't do anything about private money lenders, we are doing what ever we can. "
"I [Mr. P Chidambram] will make sure that the bank has liquidity, I will work out a plan for it"
"I believe the farmer is a honest man"

These look more like escapes than genuine measures. If a little more effort would have been poured in and some amount of vision had been amalgamated into the policy a number of other good options would have surfaced, in my opinion a better alternative to the existing one time waver would have been as follows.

1) Around 80% waiver to the institutional loans of all farmers.
2) An interest holiday on the remaining 20% loan for a period of 5 years to keep the
farmers liable and avoid ingenuine cases.
3) Availability of cheap credit to farmers indebted to private money lenders upon proper
inquiry.
4) Distribution pf poultry, Dairy, fisheries and other farm fowl for farmers to have alternate means of livelihood.
5) Formation of a vigilance committee to ensure a check on the unreasonable interest rates of private money lenders.

The loan waiver is a noble first step in the pursuit of a massive goal. This is just the beginning we need to make the farmers self-dependent and ready to face the challenges of life instead of resorting to suicides.