Monday, March 10, 2008

This Waiver is immoral, 9th March, 2008

Nagoba Khamnakar feels like a fool. Like many farmers in his village of Mahakurla in Chandrapur, Maharashtra, he borrowed money from his bank last year. He repaid it diligently, in installments and on time. Many of his neighbours, however, did not. When the Finance Minister announced last week in his Budget an amnesty against repayment of small farm loans, he said sadly, ‘What is the use of being honest?’

Canceling debts of small farmers worth a massive Rs. 60,000 crores, equal to 3% of all loans in the entire banking system, was a staggering, seductive but a hugely destructive act. When Devi Lall, announced a similar loan waiver worth Rs 9,000 crores in 1990, he killed most cooperative and rural banks. Farmers stopped repaying loans, banks stopped lending to them and it took ten years for the nation to recover from that mistake. When we hurl abuse at Devi Lall, we always add, ‘What did you expect from an illiterate peasant!’ But what do we say to a government headed by eminent economists and reformers?

One’s heart goes out to those in distress in the rural areas. There is great suffering, indeed, in our villages. But there are other, better ways to relieve it without turning the nation dishonest. For example, a sustainable crop insurance program or a restructuring the loans would have done much more good. There will be distress again; farmers will borrow again; and get into trouble again. A crop insurance scheme will then come to their aid, unlike this one-time political bribe. Sharad Pawar, the Agriculture Minister, admitted as much when he confessed the day after the Budget--‘I cannot say if [suicides] will stop after this loan waiver’.

Human society is based on trust. When the ordinary person takes a loan, he feels duty bound to repay it. He will even sell his family’s jewellery to fulfill his promise. This is because we learned as children from our mothers to keep promises. Tulsidas’ ideal, ‘praan jaye par vachan na jaye’ was held up to us as a moral ideal. We admire Karna in the Mahabharata for not switching sides because he had given his word to Duryodhana. This loan waiver wounds that moral universe. It tells the farmer not to bother to repay his next loan, because, who knows, another party will be in power and it too will cancel his debts. What message does this send to the honest village woman who struggles every week to repay her micro-loan? It is like excusing the crooked businessman who bounces his cheque. Or bailing out victims of sub-prime loans in America who are clamoring for a similar act of false compassion.

The irony is that the UPA government might actually lose more votes than it gains from this loan waiver. According to NSSO figures, almost 60% of farm loans are from money lenders. They will not benefit. R Radhakrishna Committee says that farmers from the suicide prone areas of Vidharbha and Chatisgarh will benefit less than the richer farmers in the irrigated areas who grow sugar cane and grapes. Since those who will not benefit (or benefit less) are greater than those who will, resentment will build, and the UPA might end up in losing more than it gains. Sharad Pawar has understood this. Hence, he told the farmers of India last week, ‘Don’t pay a single paise to money lenders.’ No one likes the village sahukar, but to break a promise to someone you don’t like is just as wrong as to someone you do.

Imagine the staggering paradox--to turn a nation dishonest in order to win an election, and then go on and lose it! This is one irony that the UPA government might prefer to forget.


B R Sinha said...

A great analysis of the Loan waiver gimmick played by the UPA government.

Arun' Blog said...

If UPA has to trying to secure victory like this then God help India. Is this the price we pay for democracy? If this is happening when Dr. Manmohan Singh is at the helm of affairs, what can we expect from other politicians whose only aim is to stick to the chair by hook or by crook.

Srini said...

Dear Sir,

Would help many if you can enable RSS feed on your blog.

best regards,

Sandil said...

Dear Sir,

This was a good insight into the loan waiver. I have also read your books including the Elephant Paradigm and especially liked it.

I have a very humble request. We are a group of bloggers who have created this initiative, a Blogathon, a mass awakening of bloggers in India to come forward and discuss social issues during two weeks. Visit for more details. We would like you to either be a part of the jury for this or participate/be a part of Blogathon in whatever way please you.

We are not backed/supported/funded by anyone but ourselves. Ours is a community of like-minded bloggers in India that want to come together and address issues. Please write to me on for anything else you need to know on this.

I sincerely hope you will be a part of it.

- Sandil

A_N_Nanda said...


The analysis is par excellence! And starkly convincing!!

We've been watching these kind of nautankis for quite some time. Somebody comes and hounds people to the vasectomy/tuboctomy; then somebody comes announces pensions for all those who have been victimised like that; then again somebody comes and says that there's an impending imbalance in inter se communal ratio, and then... There are people in receipt of pensions for freedom fighting, but actually they do not show any trace of patriotism. One would not be surprised to see that they were born much after India got her freedom. Then we have caste lists; many new castes have been born and anointed with historicity and measure of backwardness. Even there are people in villages owning not one but two tractors and categorised as the member of BPL(below poverty line) club!

So, everything is fair in drama and politics!


Raj said...

UPA surprisingly won this round today.

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