Paper: GS – III, Subject: Economy, Topic: Economy related – Acts, Schemes, Policies, Issue: Farm Loan Waivers.
Context:
The Reserve Bank of India (RBI) has repeatedly cautioned against farm loan waivers. However, the Government of Maharashtra recently announced a ₹35,000 crore farm loan waiver scheme, reviving the debate on its impact on credit culture, state finances, and agricultural reforms.
Key Takeaways:
Key Highlights of the Maharashtra Scheme:
- Total scheme size: ₹35,000 crore
- Beneficiaries: Around 30 lakh farmers: 20 lakh non-defaulters receive incentive of ₹50,000 and Waiver for defaulters estimated at ₹20,000 crore
- Incentive for regular payers: ₹15,000 crore
The state government argues that the waiver is necessary to protect farmers from debt distress, despite the fiscal burden.
History of Farm Loan Waivers in India:
| Scheme | Year | Amount |
| Agriculture and Rural Debt Relief Scheme (ARDRS) | 1990 | ₹10,000 crore |
| Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS) | 2008 | ₹52,500 crore |
Important point:
- These waivers were announced close to elections, highlighting their political economy dimension.
- These programs aimed to alleviate the debt burden on farmers but have faced criticism for their long-term implications.
- State-Level Initiatives: Since 2014-15, numerous state governments have introduced their own loan waiver schemes, resulting in a cumulative expenditure exceeding Rs 3 lakh crore over 35 years.
- However, only about 50% of eligible farmers have benefited from these waivers.
Farm loan waivers provide short-term relief but create long-term economic distortions. Sustainable agricultural development requires structural reforms, better credit access, crop insurance, and income support policies rather than repeated debt waivers.
Source: (The Indian Express)
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