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Farm loan waiver success sets the tone for a populist budget

Farm loan waiver success sets the tone for a populist budget
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First Published: Tue, Jun 30 2009. 01 15 AM IST

Updated: Tue, Jun 30 2009. 10 29 AM IST
Sivaganga / New Delhi: Sangu M., a 33-year-old farmer who owns an acre of land in Sivaganga district of Tamil Nadu, got a loan waiver of Rs7,000 last year. One of the 34,000 farmers in the district whose debts were written off, he said he voted for the Congress in the Lok Sabha elections earlier this year for two reasons: being a “Congress family” and because of the agricultural loan waiver scheme.
“I hope that another scheme is announced during this budget. I am quite confident but let us see,” Sangu says.
The Congress-led United Progressive Alliance (UPA) government announced in February 2008 a populist loan waiver scheme to bail out some 36 million farmers who had borrowed from various public sector banks. However, there were no handouts for those farmers who had paid their dues on time.
The total cost of the populist, scheme to the Central exchequer is estimated at Rs65,000 crore, but is said to be one of the key reasons behind the surprise victory of the UPA in the 15th general election.
The waiver cost the government Rs66.63 crore in Sivaganga district.
A Jaipur-based official with a public sector bank, who did not want to be identified, said: “The farm loan waiver has given immense mileage to the Congress as farmers have voted heavily for it. But as a banker I would say it has killed the credit system and encouraged wilful defaulters. Now we get a lot of inquiries on whether there is scope for another round of loan waiver.” His bank played a leading role in extending the loan waiver across Rajasthan.
In Rajasthan, the Congress won 20 out of 25 seats in the Lok Sabha election held in May.
Expectations are that the first budget of the new government that is to be unveiled on 6 July will have more such populist offerings.
A senior finance ministry official, who did not want to be identified, said the government is thinking of giving some incentives to farmers who paid their dues on time and were thus not covered under the loan waiver scheme. “There is a thinking that such farmers be charged 1% less on their fresh farm loans,” he added, hinting that this may be announced in the coming budget.
A.R.K. Manikam, president of Tamil Nadu Farmers Association, Sivaganga district, said while it is largely the “high level” (big) farmers who benefited, the loan waiver scheme did help the Congress garner a considerable amount of votes.
Giving an example, he says that in a taluk (sub-division of a district) called Devakottai in Sivaganga district, out of nine villages in a particular panchayat, only four farmers have got their loans waived under the scheme. He also claims that those who have benefited from the Union government’s loan waiver scheme and the Tamil Nadu government’s cooperative banks’ loan waiver scheme in 2006 have worked for mobilizing people to vote for the Congress.
The Congress-Dravida Munnetra Kazhagam alliance won 26 out of 39 seats in the Lok Sabha elections elections in Tamil Nadu.
The loan waiver is not the only populist measure the Congress relied upon.
In Karnataka, the Congress had made several populist promises—such as free colour TVs for all below poverty line card holders and rice at Rs2 per kg through the public distribution system—before the polls to score over the rival Bharatiya Janata Party, which won 19 seats, against the Congress’ six seats in the Lok Sabha elections.
Economists such as Y.K. Alagh and S.L. Rao feel the National Rural Employment Guarantee Scheme (NREGS) has earned good dividends for the Congress. The flagship welfare initiative promised at least 100 days of work in a year to one member of a poor rural family and was extended to all 596 districts in Budget 2008. It was launched in 2006, covering some 200 districts.
“I would give the UPA eight out of 10 in its rural initiative. I have been travelling in the interiors of Rajasthan, Andhra Pradesh and Gujarat and I see a different rural India after NREGS. The 15-20% people who were totally unheard of now have a voice and work,” Alagh, chairman, Institute of Rural Management had said in March.
According to Rao, chairman, Institute for Social and Economic Change, no doubt the UPA government introduced several populist measures. “For this we have to thank the communists because when Manmohan Singh was the finance minister in the early 1990s the Congress only helped get in foreign investments, led to industrial development and opened the financial sector.
Immediately after being re-elected, the UPA signalled it would take fresh stabs at populism.
In her first address to the newly elected Lok Sabha, President Pratibha Patil on 4 June emphasized measures such as a Food Security Act which promises a monthly 25kg of wheat or rice at Rs3 a kg for the poor, enlarging the scope of NREGS and enforcing social audit in flagship programmes, expanding the Rashtriya Swasthya Bima Yojana aimed at providing insurance cover to the poor, enhancing Rashtriya Krishi Vikas Yojana, aimed at improving agricultural productivity, and initiating Bharat Nirman phase II, an ambitious Rs1.76 trillion rural infrastructure programme started in 2005.
A senior Planning Commission official said a lot of emphasis is being placed by the Prime Minister’s Office on Bharat Nirman.
“Very soon, targets would be set for Bharat Nirman phase II and details will worked out in the commission,” he added.
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First Published: Tue, Jun 30 2009. 01 15 AM IST
More Topics: Pin Code | Farm loan | Budget 2009 | UPA | Sivaganga |