Agriculture in India has been badly affected from all sides due to the strong belief that it is unprofitable and unsustainable as a profession. More than 50% of employed work force is involved in agriculture yet it is able to generate only 17% of GDP due to limited investments in agriculture. Presently, the government is focused on replacing agriculture with manufacturing and services rather than providing long term support through advanced technologies. Farm loan waivers, although beneficial in the short run, have the following implications on agriculture as a whole-
Farm loan waivers have helped in survival of farmers during adverse cropping seasons. If monsoon fails, a farmer has nowhere to go and no way to pay back the loan. Loan waivers become necessary for survival of farmers in such a situation. It provides immediate relief to the farmers.
Small and marginal farmers are the backbone of Indian agriculture. Without them, Indian agriculture cannot remain sustainable. Farm loan waivers help in survival of small and marginal farming system, which is unique to developing nations like India.
As much as we want people to move out of agriculture, into manufacturing and services, it is imperative to keep tribals, rural and traditional farmers in agriculture only, unless they are trained properly to make the shift by their own will. Presently, small farmers are being forced to shift their livelihood due to limited government support for these farmers. Farm loan waivers helps these farmers to stay in agriculture if they do not have any other skill.
Despite all of the above advantages of farm loan waivers, there are various side-effects that need to be analysed to conclude whether farm loan waivers are a good support system or not-
Farm loan waivers do not help in making farmers self-sufficient. They make farmers dependent on the government forever. In an age where we are moving towards capitalism, self-sufficiency of agriculture community is very important for its sustainable growth. Farm loan waivers are an emergency feature, which should be used sparingly.
Loan waivers are a huge hole in the pocket of the government. It is an unproductive way of financing farmer’s needs, which doesn’t add to their future productivity in any way. The government needs to replace loan waivers with schemes like PMKISAN, which can make farmers self-sufficient in the long run.
Loan waivers take the funds away from capital investment in agriculture. If agriculture is to survive and flourish, it needs huge investment in productivity enhancement areas like irrigation, soil health, organic seeds, fertilizers, hydroponics etc. The only way to achieve it is to shift the focus from short term support to long run productivity enhancement support.
The productivity of crops grown in India is a fraction of its counterpart in close neighbours like China. Low productivity has a direct impact on contribution of Agriculture to GDP. In India’s case, it is clearly visible as agriculture contributes a mere 17% to GDP. Productivity is directly proportional to investment in advanced technology and farmer welfare. In order to enhance productivity, India needs to invest heavily in agriculture infrastructure.
It has been witnessed that Banks don’t want to lend to farmers anymore. They are being forced to lend a certain portion of their NDTL under PSL norms. High NPAs in agriculture is the main reason behind the negative attitude of bankers towards agriculture. One of the importance ways to reduce NPAs and encourage credit in agriculture is to encourage investment and self-sufficiency in it.
The last yet most important negative impact of Loan waivers is moral hazard. Farmers stop paying back loans because they know that the government will finance their loan even if they don’t pay back. The moral hazard has a spiral affect and creates bad name for agriculture as a profession.
Farm loan waivers have worked as saviours for farmers in times of crisis. However, it cannot be treated as a norm. It is an emergency feature which needs to be used only rarely. Its negative impact on development of agriculture needs to be taken seriously in order to ensure a prosperous agriculture sector in India