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Business News/ Opinion / Online-views/  Notes for rural votes
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Notes for rural votes

Notes for rural votes

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The biggest giveaway in Indian history is terribly myopic.

The Rs60,000 crore waiver of farm loans creates perverse incentives that will harm the rural economy in the long run. Defaulters will rejoice. Other farmers will wonder why they stuck to their payment schedules and will try to default in the future. Banks will shy away from rural lending in general, unless the government comes after them with a stick. That’s good news for moneylenders. And none of this even touches upon the core issues in Indian agriculture—low productivity and a long investment drought.

But then, the decision is not about economics. It’s about politics. The waiver is an attempt to buy votes in the next general election. Work the numbers: Rs60,000 crore will be distributed among 40 million farmers. That’s Rs15,000 per farmer. The only question is: Will that be a good enough price to sway voting decisions when farmers trudge to ballot booths later this year?

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Published: 01 Mar 2008, 12:51 AM IST
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