Waivers, round two
Will other state governments facing elections this year repeat the folly of farm loan waivers, as Rajasthan has done?
The Rs8,000 crore farm loan waiver announced in the Rajasthan state budget on Monday was both predictable and disappointing. The state heads to the polls later this year. The recent bypolls, where the Bharatiya Janata Party failed to win any of the three seats up for grabs, show that it could be in some strife. Populism is an easy fallback.
It is also an unwise one, as Maharashtra shows. It was one of the dominos to fall last year after the Uttar Pradesh farm loan waiver; the government was compelled to announce a Rs25,000 crore farm loan waiver. The Maharashtra accountant general has released data this month and the farm loan waiver is set to hit the state’s fiscal deficit.
Will other state governments facing elections this year repeat the folly? The violent protests in Mandsaur last year, for instance, could tempt the Madhya Pradesh government to follow suit, although it has confined itself to interest waivers so far.
Here’s hoping they are able to resist. Such waivers are not just fiscally irresponsible, they are ineffective—as past precedent has shown.