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Why Narendra Modi’s farm loan waiver promise in UP was bad politics too

LiveMint logoLiveMint 06-04-2017 Abhiram Ghadyalpatil

Mumbai: On 5 April, Maharashtra chief minister Devendra Fadnavis told the state legislative assembly that his government was studying the “Uttar Pradesh model of farm loan waiver”. Fadnavis indicated his government may consider a similar sop, though in a different fashion.

For the Bharatiya Janata Party (BJP) chief minister, this was a departure from his own narrative. The change in the narrative has not come from within. Prime Minister Narendra Modi pushed Fadnavis, and possibly some other chief ministers too, onto this suicidal trajectory, when he announced in a campaign rally on 15 February that the BJP, if voted to power in Uttar Pradesh, would waive crop loans.

The opposition Congress and Nationalist Congress Party in Maharashtra are down but they have not completely lost their reflexes for conventional politics. They quickly latched on to the Prime Minister’s promise, which the BJP soon formalised by including it in its UP manifesto, and revived their demand for loan waiver that Fadnavis had till then dismissed with ease. Ever eager to attack the BJP and Modi, the Shiv Sena joined in and Uddhav Thackeray sent in his ministers to meet Fadnavis and remind him that the BJP has been in power in the state since October 2014 and yet, no farm loan waiver had been announced.

To be sure, the BJP in Maharashtra did not promise farm loan waiver during the 2014 assembly elections. One BJP minister in Maharashtra, who did not wish to be identified, said that the Maharashtra government was unnecessarily being asked to honour a promise made by the UP BJP.

But farm activists like Vidarbha-based Vijay Jawandhiya and opposition politicians have rightly pointed out that it was not the UP BJP which made the promise. “It was the Prime Minister of India who made the promise,” Jawandhiya has said. The opposition and farm activists have also argued, with some amount of credibility, that the agrarian crisis in Maharashtra was much more acute, had deep-rooted reasons, and was basically on account of dry-land farming unlike in UP.

Another key differentiator is Maharashtra’s harsh suicide statistics. While the opposition has claimed that more than 9,000 farmers have taken their lives in the three years since 2014, the figures maintained by the National Crime Records Bureau (NCRB) say that 2568 and 3228 farmers committed suicides in 2014 and 2015 respectively. The NCRB data for 2016 are not yet out, but the state relief and rehabilitation department has put the preliminary figure at 3052 suicides. According to The Indian Express, Marathwada region had reported 216 suicides by 3 April.

So, the opposition and farm activists are right when they argue that the agrarian crisis in Maharashtra merited farm loan waiver more than the situation in UP on account of a couple of bad monsoons did. The idea of writing off farm loans is bad economics and disrupts credit discipline, as pointed out by none other than State Bank of India chairperson Arundhati Bhattacharya. But the political argument in Maharashtra, backed by depressing statistics that paint a grim agrarian scenario, is also right that if the Prime Minister had to choose between UP and Maharashtra if he was so keen to announce a loan waiver, Maharashtra was always a more deserving case.

In any case, it was unbecoming of the Prime Minister to make such a populist promise in a state assembly election and commit the future government to this gigantic expense. The BJP and Modi, however, were not alone in making this promise. Even the Samajwadi Party-Congress alliance made this commitment without looking at the long-term financial, social, and credit-chain costs such populist measures have caused in the past. Hence, it is fair to assume that even the SP-Congress alliance would have granted a loan waiver if they had won in UP. The Congress government in Punjab is in the process of declaring a farm loan waiver.

It is exactly this kind of spiralling effect that proves that the Prime Minister’s UP promise was bad politics too apart from being bad economics. On 4 April, Uttar Pradesh chief minister Yogi Adityanath kept a promise that he had not made by rolling out a Rs. 36359 crore farm loan waiver. The very next day, Fadnavis was forced by the opposition to climb down from the tough position he had been maintaining from day one.

Since he became the chief minister in October 2014, Fadnavis has wisely maintained an unemotional position on farm loan waiver. He has refused to write off farm loans and instead focused on making investments in agriculture to deliver long-term solutions to the agrarian crisis. Fadnavis, unlike many of his counterparts, has also rightly argued that previous farm debt waivers did not stop farm suicides.

NCP chief Sharad Pawar, addressing the opposition parties’ Sangharsha Yatra on 4 April, recalled how the then prime minister Manmohan Singh had told him while returning from a visit to Wardha in Vidarbha in 2008 that indebtedness was the main reason of farm suicides. So, the UPA government announced a Rs71,000 crore farm loan waiver, Pawar recalled, demanding a similar measure once again. Fadnavis has said that of Rs71,000 crore, loan waiver in Maharashtra accounted for Rs7,000 crore.

But suicide numbers prove that the 2008 waiver did not make any fundamental difference to the crisis. According to the NCRB, 4238 farmers committed suicide in Maharashtra in 2007. The number went down to 3802 in 2008. The suicide numbers were 2872, 3141, and 3337 in 2009, 2010, and 2011 respectively. In 2012, Maharashtra reported 3786 suicides followed by 3146 in 2013.

This proves the farm suicides have never shown a substantial decline even after the loan waiver was announced. Fadnavis was right in making this argument and concentrating more on long-term solutions—water conservation (only 18% of the cultivable land in Maharashtra is irrigated), decentralised irrigation in contrast to big dams, more coverage under institutional lending, expanding the coverage of crop insurance scheme, direct financial assistance to farmers to buy subsidised food grains, better access to consumers and direct interface between farmers and consumers etc.

Yet, the Maharashtra chief minister now looks set to walk down this populist and unproductive path of farm loan waiver, courtesy his own boss and prime minister Naendra Modi.

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