$15bn loan waiver reaps harvest of
anger By Raja M
MUMBAI
- The Indian government's US$15 billion waiver of
farmer bank loans in its budget this month has
raised a ruckus among captains of industry,
politicians and non-farmers concerned that the
huge write-off will not benefit the poorest of
farmers, will fail to address root causes of rural
poverty and will damage the economy.
Opposition parties in Parliament, terming
the waiver as a pre-election sop, condemned its
"fudgy mathematics" and called Finance Minister
Paliniappan Chidambaram a "magician" for offering
the loan waiver without specific budgetary
provisions.
A cover story run by leading
newsweekly India Today, titled "Sop Opera",
wondered whether government efforts to woo the
poor it
has
previously largely neglected were not too late to
save the Congress party and its allies from a rout
in general elections due next year.
The
loan waiver is "an electoral sop that involves a
lot of statistical jugglery and very little of
real hope for Indian farmers," said Parshuram Ray,
director of the New Delhi-based Center for
Environment and Food Security, an organization
involving some of India's leading
environmentalists, scientists, writers and
scholars such as Ashis Nandy, Kamla Chowdhry and
Pradipto Roy. "It is unlikely to address any of
the fundamental problems facing poor farmers. True
to India's electoral politics, this scheme has
very little of substance and most of it is just
symbolism designed to woo the poor and gullible
voters."
The budget's loan waiver has
uncomfortable precedents for ruling politicians.
In 1989, then prime minister Vishwanath Pratap
Singh sanctioned a $3 billion bank loan waiver
scheme but failed to keep his job.
Present
Prime Minister Manmohan Singh argues that his
United Progressive Alliance government is merely
footing the bill for agricultural distress that
arose when the present opposition parties were in
power.
Rural India has a decisive say in
elections, and politicians ignore that
constituency at their peril, as the National
Democratic Alliance found out when it was booted
out of power in 2004. Agriculture accounts for the
livelihood of 52% of the country's workforce and
contributes 18.5% of the gross domestic product
(GDP).
The economy's 8.7% GDP growth rate,
among the world's fastest, looks impressive, but
until problems in the agriculture sector are
tackled it will be fragile. In particular, the
incomes of small farmers are not keeping pace with
rising production costs in a country where the
government fixes many farm-produce purchase
prices. The Finance Ministry estimates agriculture
growth for 2007-08 at a miserable 2.6%.
The government, accused of doing little
for farmers until this last pre-general election
budget, expects 30 million farmers to benefit from
the loan waiver, which is expected to be
implemented by June. But critics claim it ignores
those most in need, replicating the faults of the
$4.5 billion National Rural Employment Guarantee
project announced in 2006 to combat rural poverty.
Only 20 million of the country's 110
million farmers are estimated to have bank loans,
against the majority who are indebted to usurious
private money lenders, something for which
Chidambaram and Agriculture Minister Sharad Pawar
have no answers. Moneylenders are estimated to
account for over 70% of loans to small farmers, at
crippling interests averaging 30%.
Perhaps
the most telling indictment of the loan waiver
scheme came from Nitish Kumar, chief minister of
Bihar, one of India's most troubled and
poverty-stricken states, who said the waiver did
very little for farmers in his state as most of
them had no access to bank loans.
Nor does
the waiver address key problems such as the
purchase price of agriculture products lagging the
increase in production costs, which are estimated
to have ballooned to an average of $333 per acre
(0.4047 of a hectare)in 2008 from $51 in 1991.
Leaders of farming communities are not
impressed with the government's "hand-out". "The
loan waiver is not a permanent solution to
problems troubling Indian farmers," Dinesh
Kulkarni, of the New Delhi-based Bharatiya Kisan
Sangh (Indian Farmers' Association), told Asia
Times Online. Gaps in the scheme mean it "will not
help the larger number of distressed farmers".
Kulkarni, who says his association
represents 800,000 farmers across the country,
believes that the government needs to address more
basic problems such as farmers getting better
prices for their produce.
"For instance,
the production cost of one tonne of sugarcane in
Maharashtra state is 1,600 rupees [US$39.60], but
the government-fixed purchase price is barely half
this cost," says Kulkarni. "Unless purchase prices
give farmers at least a 20% profit, they will
continue to suffer."
Critics also doubt
whether the bank loan waiver scheme will help
reduce the appalling number of farmers who commit
suicide under the burden of their debt; over the
past decade more than 150,000 have killed
themselves. A chilling report in one of India's
most credible national dailies, The Hindu,
estimates farmers are taking their own lives at a
rate on average of one every 30 minutes.
Reports continued of farmers killing
themselves even after the loan waiver scheme was
announced, confirming fears that the
worst-affected farmers are under the merciless
grip of private money lenders and out of reach of
the limited rescue act of the loan waiver.
Palagummi Sainath, a leading writer on
rural affairs and winner last year of the
prestigious Ramon Magsaysay award for journalism,
says the loan waiver scheme has been designed to
benefit richer farmers and political vested
interests. Sainath told a New Delhi audience
attending his lecture, "Death on the Farm: The
Agrarian Crisis and its Consequences", that 52% of
farmers in Maharashtra's Vidarbha region, the
epicenter of the suicide epidemic, are ineligible
for loan waivers as they own more, but
unproductive, land than the cut-off maximum of
five acres.
Sainath estimates that the
monthly per capita expenditure for a farm
household is $12. "Around 55% is estimated to be
spent on food. What will they have to spend on
education or health?" he demanded.
The
$4.5 billion National Rural Employment Guarantee
project announced in 2006 to offer 100 days of
employment annually to the rural population was
sharply criticized this year by governmental
auditors as being inefficient and corrupt in its
implementation to date. Combined with the
loan-waiver, that accounts for a staggering $20
billion in taxpayers' money to fund temporary
relief in a largely poverty-stricken,
under-nourished country without addressing
fundamental causes behind the poverty.
Finance Minister Chidambaram says that
while investment in India is continuing on a roll,
the farm sector was pulling down the economy with
agriculture growth stagnant in the past few years.
The loan waiver was necessary to boost agriculture
production and to control inflation, he said.
"One of the reasons why inflation is still
a threat is the food price in India," he said
during a post-budget meeting with the Associated
Chambers of Commerce and Industry of India in New
Delhi on March 6. He said India had become a
marginal importer of foodgrains, which he termed a
dangerous omen. "No country with as large a
population as India can be dependent on imports
[of foodgrains]," he said. He also pointed out
that industry in the country had collectively
enjoyed loan write-offs of more than $15 billion.
Even so, the finance minister did not
explain why his government has failed to act on
long-term measures to tackle farmer woes and
increase food production, such as implementing the
recommendations of the government-appointed Expert
Group on Agricultural Indebtedness and the M S
Swaminathan Committee on National Farm Policy. The
respected Chennai-based agriculture scientist
Swaminathan, called the Father of India's Green
Revolution, has welcomed the loan waiver but
warned that far more needs to be done to address
rural poverty.
Parshuram Ray, of the
Center for Environment and Food Security,
recommends three steps for the government to
address India's fundamental problems in
agriculture. "The first and foremost thing is to
take the initiative to withdraw agriculture from
the World Trade Organization so that it is free to
formulate, implement, control and regulate farm
policies which are pro-farmer and not pro-market."
Ray said Indian agriculture also
"desperately" needs big investment in farm
infrastructure and promotion of "ecologically
sustainable, economically viable and socially
equitable cropping patterns".
Dinesh
Kulkarni of the Bharitya Kisan Sangh points out
that Agriculture Minister Pawar had announced a
loan waiver scheme in 1978 when he was chief
minister of Maharashtra state. "If periodic loan
waiver schemes are being announced, it means that
basic problems in Indian agriculture have not been
addressed for so long," he says.
Unless
the government backs up the $15 billion loan
waiver with measures to increase rural prosperity
and help farmers from falling into another debt
trap, rural leaders say chances of farmer suicides
ending are dim - and so too are the chances of
Manmohan Singh's government surviving to present
another federal budget.
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