One of the things that I usually do not comment on is the Union Budget. The reason is simple. I know very little about economics and I have mentioned that before. For me the budget is all about special-interests driven fiscal dribbling: tariffs lifted on consumer electronics, an extra cess on cell-phones and exactly the opposite the next year.
In other words, nothing worth commenting on or getting too worked up about.
But then once in a few years, usually right before election time, the government decides to make a grand populist gesture. It gets excellent press, is politically extremely correct, can be spun of as a “crowning achievement” in the coming elections, allows poster painters to put down “savior of the common man” below gigantic cut-outs of leaders, and most importantly serves a vested interest or two. What’s positively evil genius about such gestures is that once you take even a slightly close look at it— you see that it’s blatantly unfair, isn’t that much of a big deal anyways, helps people who don’t need it that much, does not help all those whom it is supposed to and does absolutely nothing to solve the larger problem.
Yes I am talking about Sonia mam’s historic 100% government loan write-off to farmers who own less than 2 hectares and 25% loan write-off for overdue loans for all other farmers (provided they pay back 75% of their loan as negotiated) irrespective of financial condition or location , an amount that will directly cost the exchequer, as originally reported, 60,000 crores.
What the Rath Yatra is to the BJP, the loan write-off is to the Congress. Ever since the infamous loan-melas of decades ago where banks and cooperatives were forced to give out “bad loans” on the basis of non-existent collateral as a means of buying rural votes for the Congress I, nothing thrills the party base more than the word “loan forgiveness”.
Ask our President Pratibha Tai and she will tell you that loan-writeoffs are the greatest thing ever invented. That is after, of course, “shudh desi ghee” and the Nehru-Gandhi family.
With farmer suicides in places like Vidharbha and Andhra Pradesh and with the memories of BJP’s Waterloo “India Shining” campaign, the Congress needed to show its agricultural chops and since the Gandhi topis know of nothing as simple and appealing as government handouts, it was no surprise that loan waivers would be the order of the day.
Though the Congress I is going to run with the number of 60,000 crores the actual amount of subsidy according to the Business Standard is about 38,000 crores with the average hand-out to the lowest rung of farmers (which I presume is defined as only those small farmers that have defaulted on their loans, not all small farmers) being quite a bit less than the average hand-out to the lowest strata in the income tax regime (at least according to the calculations in the above linked article). In other words, its hardly the historic game-altering decision that Sonia-ji would like her rural vote-bank to believe.
What’s of course utterly wrong about the whole “write-off” business is its underlying principle of an universal amnesty. The word “universal” is of critical importance here in more ways than one. There are specific areas in the country, notably Vidharbha and parts of Andhra Pradesh that are suffering from systemic agricultural crises as evidenced by high rates of farmer suicides. A pervasive loan-relief package for these specially distressed areas would definitely have a positive effect as farmers, who have been black-listed by the government as loan defaultees, can again apply for credit and not have to rely on predatory moneylenders.
However, there are those who see a glimmer of hope. Like Gangaram Meshram of Gopalpur in Yavatmal, who owns two hectares. “I borrowed Rs 15,000 from the cooperative bank which will now be waived,” he says, though he adds hastily that he has borrowed double that amount from a moneylender at an exorbitant rate of interest. “Even if it is only Rs 15,000, it’s a big relief for me,” he says.
Similarly, Vandana Anil Shende, 25, a widow from Bharumri village, had taken a loan of Rs 16,000 from the local cooperative bank after she lost her husband. “I’m happy that I don’t have to pay back that loan and can get a fresh loan,” she says. But, her eyes brimming over, she whispers, “If the government had done this a couple of years ago, I would not have lost my husband.”
However what the government has done, instead of concentrating on those regions that need special attention, is that it has written off loans universally for all small farmers all across the nation. By doing so it has kept out of the ambit of its munificence all those who have repaid their loans, not because all of them could afford to but because they felt they had to. By rewarding loan defaulters, irrespective of their financial conditions, the government has sent an unmistakable “Tough luck suckers” message to those who made their payments. Such a gesture can only have detrimental effects on recovery for future loans—those who have been penalized for obeying the terms of the loan will not, and should not, make the same mistake again.
Because the loan relief initiative exists purely to appease certain sections and not to solve any of the problems, the way the relief has been structured makes little sense. A big farmer is defined as anyone who owns more than 2 hectares and a big farmer is not liable for a 100% loan waiver. However, from what I understand, in the domain of cotton cultivation where larger farm sizes are de-rigeur, even a farmer who owns 10 hectares is in desperate need of help.
Half an hour after Union Finance Minister P Chidambaram wound up his Budget speech, Durgadas Desapawar of Boriijara village in Vidharba’s Yavatmal district swallowed a large dose of pesticide.
The Finance Minister’s guilt-laced sop of Rs 60,000 crore for India’s farmers meant nothing to Desapawar, overcome by debt and despair. The cotton farmer had borrowed Rs 25,000 from the local cooperative bank. But he had also borrowed Rs 30,000 from private moneylenders because what he got from the bank was not enough to work his nine acres of land. Eventually, he could not repay both amounts because the price he got for his cotton was simply not remunerative enough. When Desapawar learnt that the loan waivers announced by the Finance Minister applied only to farmers with two hectares of land or less, and that he would not be eligible, he took the ultimate step. His family rushed him to the Civil Hospital at Pusad, 45 miles away. The doctors declared him dead on arrival.
Here again, the government has gone for a one-size-fits-all solution by treating the cotton grower in Vidharbha who owns 10 hectares of land at the same level as a grape cultivator with say 30 hectares of land. By not structuring benefits appropriately on the basis of need, a large number of farmers in despair like Durgadas Despawar are being deprived by the powers that be of any kind of remedial assistance.
Needless to say, the government has taken no administrative steps to combat the immediate reason why farmers are committing suicide—the predatory practices of private money lenders for whom subjecting their debtors to the most heinous of interest rates and defaulters the most hideous of humiliation and violence is standard practice. That a local Congress MLA with political protection is one of the biggest loan sharks in the Vidharbha region may not be a totally irrelevant factoid in this context. One of the principal reasons why farmers knowingly walk into the clutches of private moneylenders is that in many cases, farmers are unable to get credit through official channels. That is not simply because all of them have outstanding loan obligations —-in many cases the real reason is that local bank officials are in cahoots with moneylenders and political bosses, with beneficiaries of government loans determined by influence, both political as well as financial.
Will the government do anything about this? We know the answer.
There are of course many things the government might have done if it was really serious about solving the problems of the farmers. A stratified, tailored-to-problem-areas loan relief scheme with no means for any benefits (like the 25% rebate) percolating to prosperous farmers would have been a good start. A fertilizer subsidy scheme that takes the focus away from filling the coffers of the fat cats (50% of government subsidies go straight into the pockets of big fertilizer companies) would have been another good thing to look at. Better and cheaper “crop insurance”, access to better farming technology, creation of better distribution systems for produce —-there are a hundred things that can be and need to be done.
The Congress government had to go for the cheapest form of titillation possible—the econo-political version of the Hindi movie rain song where the audience thinks its seeing something exciting, the heroine knows its just a padded bra, and the producer is smirking at the gullibility of the audience while counting the box office receipts.
[Apologies for not answering comments in the last posts. As I keep saying, things have been unusually hectic on the work front. Been meaning to write this post for quite some time.]