The hazards of farm loan waivers
Research provides evidence that a blanket farm loan waiver scheme is detrimental to the development of credit markets
The Bharatiya Janata Party (BJP) won the 2017 state elections in Uttar Pradesh with a thumping majority and once again, the state government has a debt-waiver package ready to be implemented. The BJP’s electoral manifesto had committed to write off loans of small and marginal farmers, which would approximately cost the government Rs37,000 crore, according to initial reports. Intervention in the credit market through household debt relief has been a fiscal policy adopted by many governments both at the Central and state level for many years.